CSOLAR IV South LLC Outlook Revised To Negative From Stable Following Downgrade Of San Diego Gas & Electric

  • On Jan. 21, 2019, S&P Global Ratings lowered its long-term issuer credit rating on utility San Diego Gas & Electric (SDG&E) to 'BBB+' from 'A-' and the outlook remains negative.
  • CSOLAR IV South LLC (CSolar) receives all of its revenues from SDG&E under a long-term power purchase agreement (PPA) and the rating on the project is capped by that on SDG&E.
  • Therefore, on Jan. 24, we revised our outlook to negative from stable and affirmed our 'BBB+' issue-level rating on CSolar's senior secured debt, following the downgrade of the company's revenue counterparty SDG&E, which now caps the rating of CSolar.
  • The negative outlook on CSolar mirrors the negative outlook on SDG&E, reflecting the unique and elevated credit risks that California's electric utilities face because of their susceptibility to frequent and devastating wildfires and our assessment of the insufficient regulatory protections to deal with the unique risks of inverse condemnation.
  • We could lower our rating on CSolar, in lockstep with that on SDG&E, if we downgrade the utility by one or more notches.
TORONTO (S&P Global Ratings) Jan. 24, 2019--S&P Global Ratings today took the 
rating actions listed above. The outlook revision and rating affirmation 
follow the downgrade to SDG&E on Jan. 21, 2019. SDG&E is the material revenue 
counterparty to CSolar, purchasing all of its electricity from the solar 
facility under a long-term PPA. The project's material reliance on SDG&E for 
its revenue implies that its credit quality can be no higher than that of 
SDG&E. Therefore, as the utility rating and project rating are now at the same 
level, any further downgrade to SDG&E will result in downgrades to the project 
in equal measure.

The negative outlook on CSolar mirrors the negative outlook on SDG&E, which 
provides the project with all its revenue for the power it produces. The 
project issue-level rating is now capped by the SDG&E issuer credit rating. 
Further downgrades to SDG&E, which could occur in the coming months and could 
be one or more notches, would likely result in a lockstep downgrade to the 
issue-level rating on CSolar.