Fitch Ratings has affirmed the rating on Coso Geothermal Power Holdings LLC's (CGP) $629 million ($462 million outstanding) pass through certificates due 2026 at 'CC'. The ratings affirmation reflects the continued expectation that default is probable, as Fitch expects that operating cash flows and reserve funds will be insufficient to meet long-term financial obligations.
Key rating drivers include a Geothermal Resource Depletion: Underperformance of the geothermal resource has lowered net operating capacity at the Coso geothermal project's (Coso) three interlinked geothermal power plants. With the decline in the geothermal resource, energy revenues have fallen to levels that are not sufficient to meet debt obligations.
CGP is a special-purpose company formed to lease and operate the Coso project, which consists of three interlinked geothermal power plants located in Inyo County, CA. Coso provides royalty payments to the U.S. Navy and the Bureau of Land Management for use of the geothermal resource. Under a series of power purchase agreements, Coso's entire output will be sold to SCE through January 2030. Cash flows from both Coso and Beowawe, an affiliated geothermal project in Nevada, are available to service CGP's rent payments under the CGP lease. Rent payments are the sole source of cash available to pay debt service on the pass-through trust certificates.
