S&P affirms AES Ironwood bonds

Standard & Poor's said that it affirmed the B+ rating on AES Ironwood LLC's $308.5 million senior secured bonds and revised its outlook to stable from positive following the agency's annual review of the project.

S&P said the rating on the bonds reflects the following risks: the project is exposed to the credit risk of Williams Power Co. Inc. - to whom AES Ironwood sells its entire capacity - because it depends entirely on purchased-power agreement payments guaranteed by Williams to cover all of its operating expenses and debt service; low electricity margins that render the purchased-power agreement payments above current market; revenue is subject to dispute risk, as evidenced by a current dispute regarding the project's availability bonus claims; and the fact that the facility uses Siemens Westinghouse 501G technology, which is highly efficient but has limited proven commercial operating history.

The ratings are supported by a purchased-power agreement for the first 20 years of the bond term, remaining unamortized debt of $59 million at the beginning of the merchant period is moderate, a $35 million letter of credit posted by Williams offers limited protection against Williams' credit risk and lenders benefit from a financing structure that gives them full security in the plant's assets and accounts, the agency said.

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