Credit rating agency Fitch has affirmed its "BBB-" rating of Alta Wind 2010 Pass-Through Trust's $579.9 million senior secured pass-through certificates due 2035.
Fitch says its determination is based upon Alta's financial and operating performance, which has remained consistent with base-case projections.
Several aspects of the wind project, such as its power purchase agreement with Southern California Edison (SCE) and its favorable operating profile, factored in the credit rating agency's decision.
Alta's 2011 financial performance was similar to original base-case projections, primarily because Alta achieved commercial operation of phases IV and V ahead of schedule. Operating expenses were generally consistent with projections, although Alta has yet to establish a stable long-term cost profile, Fitch says.
Weak wind resource performance offset the additional revenue earned from achieving early commercial operation. Total energy output in 2011 appears consistent with a range of P75 to P90 production, as originally estimated by Alta's wind consultant. Fitch notes that wind resource performance has improved this year. Turbine availability has consistently surpassed expectations, averaging 97.4% and exceeding Fitch's base-case assumption of 95.7% for the initial year of operations. Strong turbine availability was offset by lower than expected balance-of-plant (BOP) availability of 95.8%.
The project has yet to consistently achieve projected BOP availability, though Alta has not experienced any persistent technical issues that would affect future performance. Fitch understands that the BOP was impacted by initial ramp-up problems, primarily harmonics issues caused by the turbines' electrical frequency of the turbines relative to that of the grid. Alta's management reports that operational adjustments have effectively resolved the issue. BOP availability was also affected in late 2011 by construction activity at nearby affiliated projects, which made compensatory payments to Alta for the loss of availability.
Alta was subject to severe curtailments by SCE during the first and second quarters of this year, causing Alta to lose nearly 25% of gross output over a four-month period. SCE had informed Alta that the curtailments were necessary due to emergency conditions arising from system-upgrade work on the Tehachapi Renewable Transmission Project.
Fitch warns that several actions could trigger a rating action, such as sustained underperformance of the wind resource, lower-than-expected turbine availability, an unexpected increase in the project's cost profile or a failure to fund the incremental debt service reserve.