Longview Power LLC Senior Secured Term Loan B Rating Lowered To 'CCC'; Recovery Rating Revised To '4' From '3'

  • U.S. merchant power project Longview Power LLC's liquidity has weakened to the point that, absent an improvement in business and financial conditions, the project could default when its revolving credit facility matures in April 2020.
  • We are lowering our rating on Longview's senior secured term loan B facility to 'CCC' from 'CCC+' and revising the recovery rating to '4' from '3'. The '4' recovery rating indicates expected recovery in case of default of 30%-50% range (rounded estimate: 30%).
  • The 'CCC' rating reflects our view that lower-than-expected power prices in the Pennsylvania-Jersey-Maryland (PJM) Interconnection drove operational underperformance at Longview in the first half of 2019; the PJM power price futures curve also indicates low prices in the second half of 2019 and 2020, further straining the project's forecasted liquidity and weakening its debt service coverage ratios (DSCRs).
  • The outlook is negative, reflecting our expectation for continued deterioration in the project's liquidity profile.
NEW YORK (S&P Global Ratings) Sept. 12, 2019—S&P Global Ratings today took the 
rating actions listed above.Longview is a project-financed entity operating a 
700 MW coal-fired plant. It began operating in December 2011 and is the most 
efficient coal plant by heat rate in PJM with advanced supercritical 
pulverized-coal boiler technology and a heat rate of 8,800 (for the first half 
of 2019). The project is based in West Virginia and sells into the PJM 
Interconnection.



The negative outlook reflects our view that the project is vulnerable and is 
dependent upon favorable business, financial, and economic conditions to meet 
its financial commitments over the next six to 12 months. We view the issuer's 
capital structure to be unsustainable in the long term. We expect that the 
project will have difficulty repaying its outstanding revolver balance when it 
comes due April 2020, at which time it is likely to face a default.


We would lower the rating if we believe that the issuer is likely to default 
over the next six months without an unforeseen positive development. Absent 
such an improvement in Longview's circumstances, we would expect to lower the 
rating to 'CCC-' in October 2019, when its revolver becomes due within six 
months.


While unlikely at this time, we could revise the outlook to stable if 
Longview's financial performance improved such that it was unlikely to face a 
nonpayment within the next 12 months. The most likely avenue for such a change 
would be if Longview refinances or extends its revolver. Otherwise, since 
capacity prices are fixed through 2021, financial improvement would require a 
significant increase in power prices--which we think is unlikely at this time. 
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