CRC Breeze Finance Senior Secured Notes Rated 'BBB'; Sub Notes Rated 'BB+'; Outlook Stable
FRANKFURT (Standard & Poor's) July 18, 2007--Standard & Poor's Ratings Services said today it assigned its 'BBB' rating to the €300 million class A senior secured amortizing notes due in 2026, and a 'BB+' rating to the €50 million class B subordinated notes, due in 2016, issued by CRC Breeze Finance S.A. (Breeze Finance). The outlook is stable. In addition, Standard & Poor's revised the recovery rating to '1' from a preliminary recovery rating of '2' to the class A notes. The recovery rating of '1' indicates our expectation of substantial recovery of principal (in the range of 90 to 100%) in the event of a payment default. Breeze Finance, a Luxembourg-based special-purpose vehicle (SPV), used the proceeds to make a loan to Breeze Two Energy GmbH & Co. KG (Breeze Two) and Eoliennes Sûroit SNC (Eoliennes Sûroit). Breeze Two is a German limited partnership company and Eoliennes Sûroit is a French unlimited liability partnership. Each have been formed for the purpose of acquiring, constructing, owning, and operating a portfolio of 39 wind farms with a nameplate capacity of 305 megawatts (MW) in Germany (Breeze Two) and 27 MW capacity in France (Eoliennes Sûroit). "The key support for the debt is provided through the favorable regulatory regimes in Germany and in France, which provides for long-term off-take agreements and fixed off-take prices," said Standard & Poor's credit analyst Ralf Etzelmueller. "The key weakness is exposure to wind as a fuel source that cannot be controlled and can fluctuate substantially over time." Breeze Two acquired all the wind parks from five different project developers, ABO Wind AG, Energiequelle GmbH, juwi GmbH, MFG Management- und Finanzberatung AG, and voltwerk AG. At June 30, 2007, more than 95% of the wind farms were completed. The last 5.6 MW wind farm is expected to become operational in the first quarter 2008, which is a long way behind the original schedule due to change of the turbine supplier owing to delivery problems. However, the impact on revenues is expected to be moderate due to compensation and adjustment mechanisms in place in case of delays. Overall, the performance for the Breeze Two wind farm portfolio in 2006 was better than projected under the p-90 base case scenario, driven mainly by stronger-than-expected wind yields in the second half of 2006. Above-average wind conditions have been prevailing in 2007 as well. All parks are run by the respective developer and have entered into long-term power off-take agreements with set prices determined by law and regulation. The off-take agreements for the French wind farms are shorter than the term of the debt by five years. The proceeds of the bonds were used to fund a six-month senior debt service reserve account (DSRA), a three-month junior DSRA, and to pay for transaction costs. Ultimately, bondholders rely on the performance of the wind farms and structural features that allow Breeze Two and Eoliennes Sûroit to pass on these funds to Breeze Finance. The portfolio benefits from full cross-collateralization. "The stable outlook reflects the good wind conditions prevailing so far, the electricity and revenue generation above base case assumptions, and the performances of all turbines in the portfolio in line with expectations," said Mr. Etzelmueller. A downgrade could occur if electricity generation is consistently below forecasts, or if regulatory support were to change. A rating upgrade, which is unlikely in the near term, would require a sustainable out-performance of the base case.
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