Fitch Upgrades East Coast Power LLC
Fitch Ratings has upgraded the rating of East Coast Power LLC's series B $850 million ($352.9 million outstanding) senior secured notes due 2008, 2012 and 2017 from 'BBB-' to 'BBB'. The Rating Watch Positive status has been removed. Coverage ratios are improved over earlier projections due to reduced leverage from the retirement earlier this year of structurally senior subsidiary debt, reducing debt service by $70.3 million through 2007. Projected coverage ratios average 2.7 times (x) using Fitch's base case natural gas pricing assumptions through 2017, and 2.5x using a stress case natural gas price of $2.50 per million British thermal units.
East Coast Power cash flows are relatively stable and predictable due to long-term energy service agreements with investment-grade counterparties. Merchant exposure is low, with sales of surplus capacity and energy comprising approximately 5% of earnings before interest and depreciation. Operating risk is low with historically high reliability for the project's facilities. Transition to ownership by a subsidiary of General Electric Capital Corporation has gone smoothly with no adverse changes in operations. A subsidiary of General Electric Company recently announced plans to increase the capacity of East Coast Power's transmission line into New York City, and to auction transmission scheduling rights for the incremental capacity. Fitch understands that East Coast Power will be fully indemnified against any negative consequences associated with construction and operation of the transmission project, and expects it will have minimal credit implications for the rated notes.
East Coast Power owns interests in two gas-fired cogeneration facilities in Linden, N.J. Linden Venture sells up to 645 megawatts of capacity and energy to Consolidated Edison Company of New York, Inc. under a power purchase agreement expiring in 2017. In addition, Linden Venture supplies steam to a ConocoPhillips refinery and Infineum USA petrochemical facility. The 165 megawatt Linden 6 facility provides steam to Linden Venture and electric power to the ConocoPhillips and Infineum facilities under long-term agreements.
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