S&P upgrades TPF II

Standard & Poor's said it raised the preliminary ratings on TPF II LC LLC's credit facilities to BB- from B+ due to a reduction in debt.

The agency also maintained a preliminary 1 recovery rating on the debt.

The outlook is stable.

The ratings reflect the company's high debt leverage that relies on merchant peaking energy revenues, which are inherently volatile, S&P said, but also relies favorably on PJM Interconnection capacity market revenues that are much less risky than energy revenues.

Revenues from capacity and ancillary services provide generally about 80% to 85% of revenue, making the credit story mostly a view of long-term PJM capacity markets, the agency said.

"The stable outlook reflects our view that cash flows will be stable over the next several years based on most revenue coming from capacity payments that are known through mid-2017 and based on proven plant performance assumptions," said Terry Pratt, an S&P analyst.

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