Fitch Ratings said May 5 that the Intermountain Power Agency is still working with the Los Angeles Department of Water and Power (LADWP) and other parties on a planned repowering of the 1,800-MW, coal-fired Intermountain power plant in Utah.
LADWP is under pressure from California greenhouse laws to get off of coal-fired generation, leading to the repowering plan unveiled earlier this decade.
Fitch Ratings said May 5 that it has assigned an ‘AA-‘ rating to Intermountain Power Agency’s (IPA) proposed approximately $85m subordinate power supply revenue refunding bonds, 2014 series A&B. The bonds are expected to price on May 13, 2014. Bond proceeds will refund the outstanding 2009 series A&B subordinate lien bonds for savings Fitch also affirmed its ‘AA-‘rating on IPA’s outstanding $673m subordinate lien bonds. The rating outlook is stable.
The bonds and notes are secured by revenues from the long-term Power Sales Contracts (PSCs) between IPA and its power purchasers.
IPA owns the Intermountain Power Project (the project), a two-unit coal-fired plant that has historically exhibited solid operational performance above industry averages. Performance returned to more normal levels in fiscal 2013, after performance in 2011 and 2012 was below average due to extended unit outages.
Project participants include 36 entities throughout Utah and California. The current rating largely factors in the financial strength of IPA’s six California purchasers, who are entitled to 75% of project generation and purchase almost 100% of power output.
IPA’s existing pollution-control equipment meets the requirements under EPA’s Mercury and Air Toxic Standards (MATS), Fitch noted. Additionally, IPA’s California purchasers have been allocated sufficient carbon allowances through 2020 to allow for a phased-in transition away from the existing coal plant.
“Environmental laws and regulations at the state and federal level remain a concern because of their potential cost impact on the purchasers and the project,” Fitch noted. “Currently enacted California environmental mandates do not invalidate the PSCs, but limit renewals and extensions. The California purchasers received carbon allowances that are expected to enable project purchases to remain economic through PSC maturity.
“IPA is working with all of the purchasers to develop a project repowering strategy that includes building a new gas-fired unit to comply with California greenhouse gas emission mandates, and would allow the California purchasers to remain project participants after the termination of the existing PSCs,” Fitch added. “Utah legislation was approved in 2012 that would allow for construction of natural gas generation at the site and the Utah purchasers have amended the IPA organization agreement to allow for natural gas conversion. Discussions regarding cost, size and capacity allocations of the repowered project are ongoing. No final decisions have been made and are not expected for some years.”