Moody's may downgrade Panoche

Moody's Investors Service said it placed the Baa3 rating assigned to Panoche Energy Center, LLC's senior secured notes on review for downgrade.

The review for downgrade is driven primarily by the weakened credit profile, including the prospect of a multi-notch rating downgrade of the project's sole offtaker , Pacific Gas & Electric Co., Moody's explained.

The review reflects the utility's material exposure to new potential liabilities associated with the Camp Fire in Northern California and the uncertainties associated with how the fire-related liabilities will be recovered, the agency said.

PG&E's credit quality serves as a cap to Panoche's rating since the project derives all of its revenue and cash flow under a long-term power purchase agreement with PG&E that expires in 2029, Moody's said.

The review for downgrade also recognizes the continuing uncertainty associated with the manner in which State Issued Legacy Contract Allowances (LC Allowances) will be treated for Panoche in both the 2018 to 2020 compliance period, the agency said, and longer term through the term of the debt.

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