Market Overview

Fitch: Storm Damage to East Coast Power, LLC Adequately Mitigated

CHICAGO--(BUSINESS WIRE)--

The long-term financial and operational impact of Hurricane Sandy on East Coast Power, LLC (ECP) is not likely to affect the company's current 'BBB+' rating.

ECP's hurricane-related damages are estimated to be between $40 - $50 million (primarily on one entity) and expected to be mainly covered by a strong insurance policy with an investment-grade insurer. ECP has sufficient cash on hand for the insurance deductible payment. Further, Fitch believes that ECP has adequate cash flow cushion to cover any potential insurance payment shortfalls, while maintaining the current rating. Fitch expects ECP to generate free cash flow of $70 - $80 million in 2013, and the project benefits from a strong sponsor that has exhibited a willingness and ability to help ECP recover.

One of the affected project entities, the L6 unit, is fully online and available for operation. The other entity, the L5 units, has a planned partial restoration date of mid-December and expects to be fully online by mid-January. Fitch notes that all critical path items have been ordered and contractors have been mobilized.

Under the terms of the power purchase agreement (PPA), ECP may utilize availability credits accrued over the past 12 months to earn capacity and energy payments under a force majeure event. Fitch anticipates that these revenues will be sufficient to cover fixed costs prior to the commencement of business interruption insurance payments 45 days after the hurricane.

The next quarterly debt payment is due on December 31st. Fitch expects debt service to be met with PPA revenues and business interruption insurance proceeds. The six-month debt service reserve is adequate to cover any cash flow shortfall due to timing issues. Fitch does not view the damage from the hurricane as a long-term credit issue and continues to forecast average coverage ratios of nearly 3.0x in the Fitch rating case through the 2017 debt maturity.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);

--'Rating Criteria for Thermal Power Projects' (June 18, 2012).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Thermal Power Projects

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681297

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Fitch Ratings
Dino Kritikos
Associate Director
+1-312-368-3150
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Cynthia Howells
Director
+1-212-908-0685
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com

 

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