Moody’s, Fitch anticipate second round of bonds for Topaz Solar farm

Topaz Solar Farm

First Solar's Eldorado installation in NevadaBoth Fitch Ratings and Moody’s Investor Services announced ratings on an anticipated bond offering from MidAmerican Energy Holdings for its 550 megawatt Topaz Solar Farm, which is being built by First Solar. This would be the second bond offering for the project, which MidAmerican bought in late 2011. MidAmerican used the bond issuing to help payoff the project, which is valued at more than $2 billion.

The first, $850 million round of bonds, proved popular among investors, selling quickly. This next round of bonds is likely to generate significant interest, too. Fitch said it expected to assign a 'BBB' rating to the planned $250 million in Series B senior secured notes. In it’s anticipated rating Fitch observed, “Topaz is expected to amend its bond indenture to reduce its debt capacity to $1.1 billion senior notes, $180 million less than previously assumed.” The smaller bond issuance means that MidAmerican will to fund a larger portion of the project costs with equity, which Fitch considers favorable to the Project's credit profile, the company said.

In making its announcement on the second round of bond for Topaz, Fitch also upgraded its rating on Topaz's first round of notes from 'BBB-' to 'BBB'. The company said the change was based on the expected transaction.  Not bad, considering this is the first time Fitch has issued a rating on a bond to finance a solar project.

Similarly, Moody's upgraded its rating on the project’s notes to Baa2 from Baa3. For the anticipated round of bonds, it assigned a Baa2 rating. In it’s rating decision Moody’s cited similar factors. But added, “Additionally, interest costs for the financing are also expected to be about 40-50 basis points lower than originally anticipated. As a result of these changes, debt service coverage ratios in all scenarios we evaluated are anticipated to be about 20 basis points higher than our previous expectations.”

Moody’s also considered the state of construction at the project, which is roughly 40 percent complete and running smoothly, and already has more than 100 megawatts online. “As a result of the capital structure changes noted above there will be less interest paid during construction and more funds available for contingencies. The contingency budget currently represents over 100 percent of the non-fixed costs remaining to be expended,” the investor services firm said. And the project, which slated for completion in 2015, continues to steam ahead. Moody’s anticipated that by the time the second round of bonding closes, another 30 megawatts of the project will be fully tested putting the project about six weeks ahead of schedule.

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