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Tenaska Georgia Partners, L.P. -- Moody's revises Tenaska Georgia's outlook to negative from stable

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Rating Action: Moody's revises Tenaska Georgia's outlook to negative from stableGlobal Credit Research - 15 Mar 2021Approximately $180 million of debt affectedNew York, March 15, 2021 -- Moody's Investors Service, ("Moody's") has revised the rating outlook to negative from stable on approximately $180.0 million of senior secured bonds due 2030 issued by Tenaska Georgia Partners, L.P. ("TGP" or "Project"). Concurrent with this action, Moody's affirmed the Baa2 rating on the bonds.RATINGS RATIONALEThe change in rating outlook to negative reflects TGP's linkage to the rating and outlook of Exelon Generation Company, LLC (ExGen, Baa2 negative) as TGP's sole contract counterparty. Moody's recently revised ExGen's outlook to negative from stable following the announcement that it will be spun off as an independent entity from its parent company, Exelon Corporation (Exelon, Baa2 stable). ExGen's negative outlook is also partly attributed to the recent severe cold temperatures in Texas and the Midwest, which resulted in a pre-tax loss of between $750 million to $900 million as some of ExGen's natural gas-fired units were offline for a period of time.At the same time, we are affirming the Baa2 rating for TGP. This reflects the strength of the underlying credit profile of the Project from both a financial and operating standpoint. Recent financial performance has been consistent and strong with the Project registering a debt service coverage ratio (DSCR) of 1.57x for the twelve months ended September 30, 2020 (as calculated by Moody's, which incorporates cash interest, major maintenance and changes in working capital), which was up slightly from the 1.54x DSCR for fiscal year 2019. The budget for 2021 also shows a strong DSCR of 1.52x.TGP operates under a 29-year tolling agreement, whereby TGP makes all of the Project's output available to ExGen, who pays TGP fixed capacity payments, designed to compensate TGP for fixed operating and maintenance costs and debt service payments, as well as delivered energy payments to cover variable operating costs. ExGen is responsible for providing the fuel to be used in the production of electricity. This agreement with ExGen provides predictable and stable cash flows for the Project.Notwithstanding the linkage to ExGen's rating, the market has recognized the relative importance of TGP as a regional peaking unit for load serving customers. Based on SEC filed information, in 2010, ExGen sold its rights under the off-take agreement with TGP through a back-to-back PPA with Georgia Power Company (GPC: Baa1 stable), a subsidiary of The Southern Company (Baa2 stable), that matures June 1, 2030. While TGP's off-taker remains ExGen, the fact that ExGen sold its rights under a long-term off-take arrangement through the entire term of the toll to GPC, a major load-serving entity in the region, is a unique credit strength and indicates the relative importance of the plant for the region.The rating affirmation further reflects the operating track record of TGP and the operational oversight of Tenaska Operations, Inc. (Tenaska). The Project has exhibited consistent and strong operational performance with recent availability of 100%. TGP is expected to continue its good operating performance over the long term due to the proven nature of the GE technology, the long-term service agreement (LTSA) with General Electric International, Inc. (GEI) and Tenaska's oversight and management.Rating OutlookThe negative outlook reflects the linkage to ExGen, which also has a negative outlook, as the Project's sole contract counterparty and source of cash flow.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGFactors that could lead to an upgradeTGP's rating is capped at the rating of the offtaker. In light of the negative outlook and the off-taker's Baa2 rating and negative outlook, the rating is unlikely to be upgraded in the near term. However, the outlook could move back to stable if ExGen's outlook moves back to stable.Factors that could lead to a downgradeThe rating could be revised downward if ExGen's rating were to be downgraded, or if the Project were to experience serious operational issues, potentially outside the range covered by the LTSA, which could impact the Project's cash flow stability such that annual DSCR falls below 1.40x on a sustained basis.PROFILETGP is a 945 MW natural gas and oil-fired, simple-cycle electric generation peaking facility located in Heard County, Georgia. TGP's cash flows are received from ExGen through a long-term tolling agreement. The Project operates six GE 7FA natural gas turbines, all of which are covered by an LTSA with GEI.The principal methodology used in this rating was Power Generation Projects Methodology published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1236893. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Richard E. Donner VP - Senior Credit Officer Project Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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