CE Oaxaca Dos, S. de R.L. de C.V. 'BBB-' Issue-Level Rating Affirmed; Outlook Stable
- Mexico-based wind power project, Oaxaca II, performed in line with our expectations.
- We are affirming our 'BBB-' rating on the issue.
- The stable outlook reflects the project's long-term power purchase agreements with Comisión Federal de Electricidad and reasonable expectations for wind resource and turbine performance.
MEXICO CITY (Standard & Poor's) July 8, 2014--Standard & Poor's Ratings Services affirmed its 'BBB-' rating on CE Oaxaca Dos S. de R.L. de C.V.'s (Oaxaca II) $148.5 million, fixed interest rate senior secured notes due Dec. 31, 2031. The outlook is stable. "Oaxaca II will repay debt with cash flow from its 102 megawatt wind farm project that earns revenues from energy it sells under a long-term power-purchase agreement with Comision Federal De Electricidad. Acciona S.A., a Spain-based, engineering, construction and concession company, indirectly owns Oaxaca II, said Standard & Poor's credit analyst Monica Ponce. The 'BBB-' ratings reflects the following strengths:
- Twenty-year PPA with strong offtaker, CFE, eliminating price risk, but not volume risk.
- Various favorable technical opinions as well as the track record of wind availability and the on-site information for a period of five years support the excellent conditions of wind resource in the state of Oaxaca.
- Twenty year operations and maintenance (O&M) contract, which matches the life of the PPA and the notes' tenor. Moreover, we believe O&M budget to be conservative mitigating possible variations on actual O&M.
- Proven technology as Acciona has used these turbines since 2004 with an average availability in its wind projects of 98%.
- Adequate debt service coverage reserve (DSCR) under our base case scenario which considers a one-year 90% probability of 96% availability. Under this scenario, the minimum DSCR is 1.43x and the average DSCR is 1.45x.
These strengths are somewhat offset by the following weaknesses:
- The cash flow from each project depends directly on energy production that relies on the wind resource that is seasonal in nature and beyond management's control.
- Reliance on one type of wind turbine technology. While the 68 Acciona Windpower AW 70 1.5 MW wind turbines are commercially proven, any future serial defect or maintenance/spare parts issues arising after the turbine warranties expire could result in lower revenues and increased costs. The certified design life of the 68 Acciona Windpower AW 70 1.5 MW is 20 years, matching the debt tenor.
- O&M costs for the wind energy industry have proven to be higher than initially projected, although this has not been the case for Oaxaca II.
Oaxaca II is a 102 MW wind farm located in the Isthmus region of Tehuantepec in the state of Oaxaca, 17 kilometers from the Pacific coast. The wind farm is comprised of 68 wind turbines laid out in three sections. The project began commercial operations on Feb. 6, 2012. RELATED CRITERIA AND RESEARCH Related Criteria
- Counterparty Risk Framework Methodology And Assumptions, June 25, 2013
- Project Finance Construction and Operations Counterparty Methodology, Dec. 20, 2011
- Updated Project Finance Summary Debt Rating Criteria, Sept. 18, 2007
- Criteria For Special-Purpose Entities In Project Finance Transactions, Nov. 20. 2000
Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Monica D Ponce, Mexico City (52) 55-5081-4454; monica.ponce@standardandpoors.com |
| Secondary Contact: | Veronica Yanez, Mexico City (52) 55-5081-4485; veronica.yanez@standardandpoors.com |
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