S&P snips Elwood Energy bonds

S&P said it lowered its ratings on Elwood Energy LLC’s senior secured bonds to CCC+ from B-. The recovery rating remains 1, indicating very high (90%-100%; rounded estimate: 95%) recovery if the issuer defaults.

The Pennsylvania-New Jersey-Maryland Interconnection fined the issuer after Winter Storm Elliott and Elwood may have problems paying the fine, according to S&P.

“The downgrade reflects our expectation that Elwood may experience liquidity constraints in the second half of 2024 due to the $52.7 million penalty that PJM imposed on the project following Winter Storm Elliot. On Dec. 23 and 24, 2022, the project experienced a shortfall in natural gas deliveries under its fixed transportation agreement with ANR Pipeline Co. As a result, Elwood was not able to comply with PJM dispatch instructions on those dates and incurred the capacity event charge that it must repay before the end of the year,” the agency said in a press release.

The project made a principal and interest payment of $22.3 million in January and S&P said it expects Elwood to make its next payment of about $2 million in July. As of April 30, Elwood had enough liquidity given its undrawn $20 million revolving credit facility, $10.5 million equity infusion from J-Power, and the expected $10 million operating cash flow.

“However, we expect that the project may experience a liquidity shortfall in the second half of 2024 unless it receives another equity injection or successfully contests the PJM penalty in court,” S&P said.

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