Fitch to rate Terra-Gen loan BB-

Fitch Ratings said it expects to rate Terra-Gen Finance, LLC's $300 million term loan facility and $60 million working capital facility BB-.

The outlook is stable.

The expected rating is based on Terra-Gen's financial profile during the six-year tenor of the term loan facility, which is structurally subordinated to project-level debt, and Terra-Gen's ability to refinance the outstanding principal balance at maturity, the agency said.

Despite the elevated risk profile of the portfolio over the long term, Terra-Gen's debt capacity appears sufficient to refinance outstanding debt under varying levels of stress primarily due to the receipt of fixed-price contractual revenues, the agency added.

The ratings consider revenues could fall short of projections due to price volatility under the regulatory short-run avoided cost formula and on non-contracted merchant revenues, potential for higher expenses, structural subordination to project-level debt and cash traps could reduce cash available to repay Terra-Gen's debt and Terra-Gen is exposed to refinancing risk and depends upon a cash sweep mechanism due to minimal scheduled amortization during the term of the debt, Fitch said.

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