Fitch Rates Solar Star's $1B Sr Secured Notes 'BBB-'; Outlook Stable

Business Wire

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned a rating of 'BBB-' to Solar Star Funding, LLC's (Solar Star) $1billion series A senior notes. The Rating Outlook is Stable. The project reached financial close on June 27, 2013. The series A notes increased to $1 billion from $700 million since Fitch issued its expected rating, and the series B notes are expected to be reduced proportionately. A New Issue report is available on Fitch's website at www.fitchratings.com. The report updates the Presale Report issued on June 13, 2013 and includes an update of the project's construction.

KEY RATING DRIVERS

Manageable Completion Risk: Delay risk is mitigated by 11 months scheduling surplus before the offtake agreement's completion deadline. SunPower's construction obligations are backed by liquidity to absorb potential delay penalties and contractor replacement risks. SunPower is able to supply and build large projects as evidenced by its near completion of a 250 MW plant. (Completion Risk: Midrange)

Contracted Revenues: Revenue risk is low with annually escalating, fixed-price, 20-year power purchase agreements (PPA) with Southern California Edison (SCE, rated 'A-'; Stable Outlook by Fitch). The energy production requirement is not onerous. PPA termination risk is low. (Revenue Risk: Midrange)

Stable Operating and Cost Profile: Crystalline technology has a long operating history, mitigating plant performance risks. SunPower, as the plant operator, has a track record of high plant availability. Long-term agreements support routine and major maintenance needs. Added liquidity mitigates potential costs for unforeseen events and contractor replacement risks. (Operating Risk: Midrange)

Sufficient Solar Resource: Total generation output in Fitch's rating case is based on a one-year P90 estimate of electric generation to mitigate the potential for lower-than-expected solar resource. The project can meet debt obligations under a stress of one-year P99 generation. (Supply Risk: Midrange)

Adequate Financial Performance: Base case debt service coverage ratios (DSCR) average 1.50x with a minimum of 1.44x. Fitch's rating case of increased expenses and reduced energy output result in an average DSCR of 1.31x with a minimum of 1.30x, supportive of the rating.

RATING SENSITIVITIES

Completion Delays: A delay in project completion beyond the expected commercial operation date (COD) of Oct. 31, 2015 could be negative to the rating.

Inadequate Energy Output: Energy production persistently underperforming original projections could result in a downgrade.

Variable Cost Profile: Expenses that are persistently higher than the forecast and result in DSCRs below 1.30x would result in a downgrade.

SECURITY

Security for the series A notes is a first-ranking priority over substantially all of the assets of the issuer and subsidiaries including real property, project accounts and pledge of equity interest.

TRANSACTION SUMMARY

Solar Star is a net 579 MW alternating current (AC) crystalline photovoltaic (PV) project in construction. The rating anticipates an additional $281.2 million in senior debt to be issued, subject to rating affirmation on the series A notes and minimum projected DSCRs. The proceeds of the series A issuance will be used to fund a portion of construction, start-up, and transaction financing costs. To the extent that planned debt is not issued, project sponsor MidAmerican Energy Holdings pledges to provide sufficient equity to fully fund the estimated cost of $2,751 million.

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

Applicable Criteria and Related Research:

-Rating Criteria for Solar Power Projects (Feb. 21, 2013)

--'Rating Criteria for Infrastructure and Project Finance' (April 9, 2013).

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 Solar Power Projects (Utility-Scale Photovoltaic, Concentrating Photovoltaic, and Concentrating Solar Power)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701053

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=806187

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Contact:
Fitch Ratings
Primary Analyst
Yvette Dennis, +1-212-908-0668
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Andrew Joynt, +1-415-732-5622
Associate Director
or
Committee Chairperson
Greg Remec, +1-312-606-2339
Senior Director
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