ExGen Renewables IV LLC Ratings Placed on Credit Watch Negative Following Recent Downgrade of PG&E Corp.

  • ExGen Renewables IV LLC (EGR IV) receives 40% - 45% of its distributions from single asset AV Solar Ranch (AVSR). AVSR operates under a power purchase agreement (PPA) with utility Pacific Gas & Electric Co. (B/Watch Neg/B).
  • We placed our ratings on EGR IV on CreditWatch with negative implications to reflect the rating action taken on utility, Pacific Gas & Electric Co. (Pac Gas) and parent PG&E Corp. on Jan. 7, 2019.
  • The CreditWatch placement on EGR IV reflects the risks to its distributions from the AVSR contract in light of recently elevated risks at PG&E, which is a PPA counterparty to AVSR. We believe that the souring political and regulatory environment at PG&E could, in the worst case, lead to a PG&E bankruptcy. If that were to occur, PG&E could seek to reject the AVSR contract, or separately seek renegotiation at a lower price, which could potentially worsen EGR IV's financial measures significantly. In addition, EGR IV's 's satisfactory business risk profile, which is underpinned by the strength of contracted cash flows from investment-grade counterparties under stable fixed-price contracts, could also decline.
NEW YORK (S&P Global Ratings) Jan. 10, 2019—S&P Global Ratings today took the 
rating actions listed above. Our CreditWatch placement reflects our view that 
EGR IV faces risks to its distributions from the AVSR contract in light of 
recently elevated risks at PG&E, which is a PPA counterparty to AVSR. 

We downgraded PG&E and Pac Gas  to 'B' from 'BBB-' on Jan. 7, 2019, reflecting 
the utility's worsened political and regulatory environment. This leads to 
conditions that may significantly limit the company's options, including its 
ability to consistently finance or safely operate its businesses.

Credit Watch
The CreditWatch placement reflects the risks to EGR IV's  distributions from 
the AVSR contract in light of recently elevated risks at PG&E. We expect to 
resolve the negative CreditWatch when we reach a similar resolution for PG&E 
likely over the next few months. If PG&E's credit quality erodes further we 
are likely to maintain our CreditWatch listing. If it files for bankruptcy, we 
will monitor whether the utility petitions the court to abrogate its power 
contracts. If it becomes likely that AVSR's contract is vulnerable to 
rejection as part of the bankruptcy proceeding, we would factor that into our 
assessment. At this juncture we assume that a bankruptcy filing would not 
result in PG&E seeking to reject this PPA.