S&P gives Southeast PowerGen loans BB

Standard & Poor's said it assigned its preliminary BB rating and preliminary 2 recovery rating to project finance entity Southeast PowerGen LLC's proposed $480 million senior secured term loan due 2021 and $70.5 million revolving credit facility due 2019.

According to the agency, the rating primarily reflects exposure to recontracting risk when two key offtake agreements expire after 2015, moderate debt leverage (initial consolidated debt per kilowatt (kw) of roughly $249), reliance on residual cash flows from subsidiary Mackinaw Power LLC and refinancing risk at the end of the term loan B tenor.

These risks are partially offset by the project's strong tolling contracts with creditworthy counterparties. The tolling agreements limit demand and price risk by providing capacity payments in addition to pass-throughs for fuel and other variable expenses, S&P said.

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