S&P puts Homer City on watch

Standard & Poor’s said it placed Homer City Generation LP’s B- issuer credit rating on CreditWatch with negative implications, along with the B+ rating on its senior secured notes.

The recovery rating on the notes remains at 1, indicating 90% to 100% expected default recovery.

The company’s financial performance could potentially weaken materially due to lower power prices in the PJM Interconnection power market, S&P said.

Persistently low natural gas prices have significantly reduced power prices in the PJM energy market, which will negatively affect Homer City’s financial performance, the agency said.

Homer City earns energy and capacity revenues from its single asset – a 1,884 megawatt coal-fired power plant located in western Pennsylvania, S&P said.

Along with revenue forecasts of revenues and cost of production based on current commodity-price assumptions, the agency said it also will consider any major maintenance requirements and its capital expenditures.

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