CPV Shore Holdings LLC's Senior Secured Debt Rated 'BB'; Outlook Stable


  • CPV Shore Holdings LLC (CPV), the owner of the Woodbridge Energy Center in New Jersey, has issued a $425 million senior secured term loan B due 2025 and a $120 million senior secured revolving credit facility due 2023. CPV utilized proceeds from the issuance primarily to partly refinance a prior term loan and partly to fund distributions to sponsors.
  • Woodbridge Energy Center is a natural gas fired power plant that sells energy and capacity into the Pennsylvania-New Jersey-Maryland (PJM) Interconnection, a market pressured by weak demand growth and oversupply.
  • The plant has the operational risk characteristics of typical gas-fired power generators. Based on our view of market-driven variables, such as power demand, the pace of retirement for uneconomical units, commodity prices, and capacity auction cleared prices, we forecast Woodbridge's realized spark spreads in conjunction with its dispatch characteristics to provide a minimum debt service coverage ratio (DSCR) of at least 1.47x and average DSCR of 1.8x through refinancing. We note the project has a HRCO for approximately 100% of output through April 2021.
  • On March 8, 2019, S&P Global Ratings assigned a 'BB' rating to CPV Shore Holding LLC's senior secured debt. The '1' recovery rating indicates our expectation of very high recovery (90%-100%; rounded estimate: 90%) recovery in the event of default.
  • The stable outlook reflects our expectation that CPV, through refinancing, will maintain average DSCR of about 1.8x. We also expect CPV to maintain a capacity factor in the 70% to 80% range and a heat rate of 6,800 Btu/Kwh to 6,950 Btu/Kwh over the next five years.
NEW YORK (S&P Global Ratings) March 8, 2019--S&P Global Ratings today took the 
rating actions listed above.

The borrower, CPV Shore Holdings LLC, is owned by CPV Shore Investment LLC 
(37.53%), Toyota Tsusho Shore LLC (31.25%), Osaka Gas Shore LLC (20.00%), and 
John Hancock Life Insurance Co. (U.S.A.) (11.22%). We believe CPV Shore 
Holdings LLC has customary separateness provisions in the financing and 
organizational documents to consider that CPV Shore Holdings LLC is adequately 
ring-fenced from the parent entities. Based on our review of the final 
documentation, we assess CPV Shore Holdings LLC to be de-linked from its 
parents because it met our requirements. The final documentation also suggests 
that this project has the usual and customary terms and provisions typically 
seen in this kind of project finance transaction, such as cash flow waterfall, 
reserves, covenants, and borrowing restrictions.

CPV has paid down its prior term loan and replaced it with a new term loan. 
CPV Shore Holdings LLC has raised $425 million in a senior secured term loan 
through Woodbridge to partially fund a $100 million distribution to the 
sponsors, refinance the prior term loan balance (not rated), and fund 
transaction expenses. The prior term loan was used to fund the construction 
and initial operation of the project.

The stable outlook reflects our expectation that CPV, through refinancing, 
will maintain average DSCR of about 1.8x. We also expect CPV to maintain a 
capacity factor in the 70% to 80% range and a heat rate of 6,800 Btu/Kwh to 
6,950 Btu/Kwh over the next five years.

Over the life of the project, we expect DSCRs averaging about 1.8x. We also 
expect the project's minimum DSCR to be 1.47x in 2026.

We could lower the rating if the project is unable to maintain a DSCR above 
1.35x on a consistent basis. Due to the single asset exposure, a downgrade 
could occur due a single meaningful event. For example, we could consider a 
negative rating action if the project experienced unexpected operational 
issues that require an extensive unforced outage.  The cash flow sweeps also 
assume a level of cash flows from gas optimization. We view these cash flows 
as relatively higher risk. The inability of the project to sustain these cash 
flows would lead to a downgrade. 

A downgrade could also stem from the deterioration of energy margins possibly 
because of lower power demand or power prices. In addition, if the project 
doesn't sweep debt as we currently expect, we could consider a negative rating 
action on the project. Furthermore, if our expectations changed with regards 
to the downside resilience of the project, we could consider a negative rating 
action.

While we view it as unlikely, we could raise the ratings if the project 
achieves a minimum base DSCR of greater than 2.5x in all years, including 
during the post refinancing period. This could stem from a secular improvement 
in power and capacity prices in PJM and the unit's ability to continue to 
procure inexpensive natural gas feedstock.
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