Fitch affirms Sutton notes

Fitch Ratings said it affirmed Sutton Bridge Financing Ltd.'s £195 million and $150 million of senior secured bonds due 2022 at BBB.

The outlook is negative.

The bonds' ratings are supported by a capacity and tolling agreement with EDF Energy, which insulates the project from market gas, electricity and carbon price uncertainty as well as dispatch risk until April 2014, the agency said.

The transaction also benefits from the 100% ownership by EDF Energy, as exemplified by EDF Energy's efforts to maintain operating cash flows at Sutton Bridge Power during a major outage in 2010 by maintaining capacity and tolling agreement payments, the agency added.

Although the tightening reserve margin in U.K. electricity generation may support project economics, this is offset by the increased volatility and collateral requirements associated with merchant power plants, Fitch said.

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