Fitch Ratings has published an update of its official rating criteria for solar projects. The document describes the analytical framework that the rating agency applies to evaluate debt issued for a broad range of utility-scale PV, concentrating PV and concentrating solar power projects.
The solar projects discussed in the report are financed as stand-alone assets (or portfolios) with no formal guarantee of debt service from the sponsors (nonrecourse). This updated report replaces the existing criteria (published Feb. 23, 2012) without modifying Fitch's analytical approach, the company says.
The report includes further clarification of Fitch's assessment of solar power projects in operation compared to projects under construction. No changes to the ratings of existing transactions are anticipated as a result of the application of the updated rating criteria.
The report also provides a summary of the broad attributes that support the ratings for solar power projects by highlighting the six key rating drivers that Fitch evaluates when rating debt issued for solar power projects. The rating drivers are as follows:
– Completion risk: Reasonableness of plan to achieve commercial operation, considering technology risk, contractor qualifications and construction contract terms, including completion guarantees;
– Operation risk: Stability and adequacy of plant performance supported by a qualified operator, comprehensive maintenance regime and reliable technology;
– Revenue risk – volume: Measured variability of solar resource; scope, quality and reliability of a project's energy production forecast;
– Revenue risk – price: Strength, duration and flexibility of the power sales arrangement, as well as the stability of the regulatory support framework;
– Debt structure: Composition of payment terms and strength of covenants to support debt payment, maintain adequate liquidity and limit leverage, and;
– Debt service: Cashflow resiliency to support timely debt payment under base case, stress case and break-even financial scenarios.