S&P rates Panoche bonds BBB-

Standard & Poor's said it assigned a preliminary BBB- rating to Panoche Energy Center LLC's proposed $330 million senior secured bonds due July 2029.

The outlook is stable.

Panoche was formed as a single-purpose bankruptcy-remote entity owned by United States Power Fund II LP, a private equity fund managed by EIF Management LLC (not rated) to develop, build, own and operate a combustion turbine power plant.

Proceeds will be used to fund some of the cost to build the facility and will repay the debt with revenue it plans to earn through a long-term power purchase and sale agreement with Pacific Gas & Electric Co. (BBB+/stable/A-2).

The BBB- rating reflects reliance on new technology and the operating and maintenance costs for the technology that could be greater than expected, according to the agency.

The company's weaknesses are balanced by a fixed-price contract, project liquidity, and contractual protections and insurance, S&P said.

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