Moody's rates Longview Power loans Ba3

Moody's Investors Service said it assigned Ba3 ratings to Longview Power, LLC's $1.1 billion senior secured credit facilities, which include $900 million of term and construction loans, a $100 million revolver and a $100 million synthetic letter-of-credit facility.

The outlook is stable.

Along with $930 million of equity, proceeds of the term and construction loans will be used to help finance the construction of a $1.8 billion coal-fired power plant. The revolver will be available to fund working capital needs, and the synthetic letter-of-credit facility will be used to fulfill the debt service reserve requirement to the project's counterparties.

The agency said the Ba3 rating reflects the strong economics of the project, driven by low variable costs, and its projected operating financial metrics, which are supported by the significant equity commitment and are robust for a single-asset merchant plant despite the high capital costs.

These fundamental strengths help offset the project's merchant risk, unproven new capacity market price setting mechanism, high capital costs, refinancing risk should the holding company take on a significant amount of additional leverage, the fact that a significant portion of the equity commitment is provided by an unrated entity, the developer's lack of significant experience with coal plants and the project's construction risk, Moody's said, noting that this is a complex, greenfield project with new technology.

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