Fitch Ratings said March 20 that it has affirmed the ‘BBB’ rating on $1.1 billion senior secured notes due 2039 held by Topaz Solar Farms LLC.
The Rating Outlook is Stable. The ‘BBB’ rating affirmation and Stable Outlook reflect completion of the project within budget and ahead of schedule, with stable operating performance to date. The long-term financial profile is anchored by a fixed price power purchase agreement (PPA) with an investment grade counterparty as well as modest leverage, resulting in a debt service coverage ratio (DSCR) profile consistent with the ‘BBB’ rating level.
The revenues of Topaz are anchored by an investment grade utility off-taker, Pacific Gas & Electric, under a long-term, fixed price power purchase agreement (PPA) that provides a one-month cushion beyond the expected debt maturity.
Completion risk has been removed as a key rating driver for Topaz due to the fully operational nature of the project following early completion under the PPA. The project reached substantial completion on Nov. 6, 2014, roughly six months head of the EPC guaranteed date. The project reached the commercial operation date under the PPA with PG&E in October 2014 following the turnover of the final block of the 550 MW project. Final completion was reached on Feb. 28, 2015.
Fitch views positively the completion of the project within budget and only minor draws on the contingency. Less than 10% of the $90 million contingency funds will be drawn to fund installation of a security system and bonus payments to First Solar for early completion of the project. The IE has confirmed that there is sufficient liquidity to fund the remaining final completion costs. Overall, the project’s cumulative draw amounts remain in line with the budget and sufficient funds remain to successfully achieve final completion within the anticipated timeline.
Operations to date indicate strong performance at Topaz after accounting for the increased generation as a result of early completion. Fitch said the project has been generating more than 3,000 MWh per day with availability of 99.5% since achieving commercial operation on Oct. 27.
Total production for 2014 was more than 8% above modelled at roughly 1.1 GWh while year to date 2015 is 25.1% above modelled generation at 182,607 MWh. The increase compared to original projects is due largely to the early turnover of power blocks at the project site, however, insolation remains above budget as well. The project has experienced moderate curtailment by PG&E but is reimbursable under the PPA and not a risk to the project. Revenues earned to date have been deposited into the construction accounts and will flow through the waterfall to equity once all requirements have been met.
Topaz is a 550-MW (ac) solar photovoltaic (PV) facility on 4,900 project-owned acres in San Luis Obispo County, California. Topaz employs PV modules designed and manufactured by First Solar using commercially proven thin film cadmium telluride PV cell technology mounted at a fixed tilt of 25-degrees with no tracking risks.