S&P affirms LS Power

Standard & Poor's said it affirmed the BBB rating on LS Power Funding Corp.'s $226.4 million 8.08% amortizing senior secured bonds due 2016 ($226.4 million outstanding at Sept. 30, 2010).

The outlook is stable.

The BBB rating reflects the good performance results for the plants, Investment-grade-rated purchasing utilities and well-structured PPAs with availability-based capacity payments that cover debt service and other fixed expenses, the agency said.

The rating also reflects the fact that the projects rely on PPAs with capacity rates that result in all-in power prices that are generally above market, which increases the risk that counterparties may attempt to frustrate contractual provisions in the long term, the agency said.

Steam-supply contracts for Whitewater expire or are subject to renegotiation and renewal before the senior bonds mature and there is exposure to a speculative fuel-supply contract counterparty, Dynegy Inc. (B-/negative/B-2), the agency noted.

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