S&P cuts AES Red Oak, Ironwood bonds to B+

Standard & Poor's said it lowered its rating on AES Red Oak LLC's $384 million senior secured bonds, approximately $375 million currently outstanding, to B+ from BB-.

Separtely, S&P said it lowered its rating on AES Ironwood LLC's $308.5 million senior secured bonds (with $301.8 million currently outstanding) to B+ from BB-.

The outlook for both ratings is negative.

"This action follows our revised market price assumptions given the prolonged depression in electricity market prices and the conclusion that the project would not be able to meet debt service requirements under a pure merchant scenario in current market conditions," said S&P credit analyst Elif Acar.

S&P said the negative outlook reflects the outlook on The Williams Cos. Inc. The project rating will be tied to the rating of its sole offtaker, Williams, as long as the market conditions do not allow the project to earn revenues to cover its debt service at adequate levels without the benefit of a power purchase agreement.

The project currently has a power purchase agreement with Williams Power Co. Inc. (f.k.a. Williams Energy Trading and Marketing Co.), whose obligations under the agreement are guaranteed by Williams.

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