Fitch Ratings says it expects to assign a BBB rating to Topaz Solar Farms LLC's $250 million Series B senior secured notes, due 2039. Fitch has upgraded Topaz's existing pari passu $850 million Series A senior secured notes, also due 2039, to BBB from BBB- based on the expected transaction. The rating outlook on both series is stable.
Topaz is a 586 MW solar PV farm under construction in San Luis Obispo County, Calif. According to Fitch, Topaz is expected to amend its bond indenture to reduce its debt capacity to $1.10 billion senior notes – $180 million less than previously assumed. The smaller Series B senior notes issue will require the sponsor, MidAmerican Energy Holdings Company, to fund a larger portion of the project costs with equity, which Fitch considers favorable to the project's credit profile.
Contractor First Solar Inc. is performing well under its engineering, procurement and construction (EPC) contract, Fitch adds. If First Solar is unable to meet its EPC obligations, Fitch believes Topaz can still reach completion and maintain projected coverage ratios based on the robust equity commitment from MidAmerican, substantial project liquidity, and sufficient availability of alternate contractors and panel suppliers.
The addition of an upgraded First Solar panel model and additional inverter equipment into the project design is viewed as neutral to rating. Additionally, the revenues of Topaz are anchored by an investment grade utility off-taker, Pacific Gas & Electric Co., under a long-term, fixed-price power purchase agreement.
