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Gas companies face Californian wipe-out, say S&P, Moody’s

Gas companies face Californian wipe-out, say S&P, Moody’s

Ratings agencies say the state’s bid to go 100% renewable poses a ‘significant threat’ to gas generators’ credit stability

Newport Wedge, California (Photo: Tom Walker/Flickr)

Gas companies in California face credit downgrades, ratings agencies say, after the state pledged to get all of its power from renewable sources by 2045.

On 10 September, California governor Jerry Brown signed a bill which would require 100% of the state electricity’s to come from carbon-free sources.

That would have no immediate effect on most gas generators, according to a report by Standard & Poor’s (S&P) analyst Michael Ferguson this month. However, he said: “We believe that over the long term, with the growth of renewable energy, these utilities face a significant threat to their market position, finances, and credit stability.”

Within a fortnight of the California bill, S&P had revised its ratings outlook for Middle River Power, an equity firm backing a natural gas-fired plant providing electricity for 500,000 people in San Berdinado, from stable to negative. On top of increased competition from renewables, the credit agency cited “a more challenging (…) regulatory environment for natural gas-fired assets over the long term because of aggressive renewable energy goal”.

“This gas plant is going to have to be refinanced,” Ferguson told Climate Home News, “and it’s going to get more and more difficult to refinance over the long-term because they are going to be facing increasing renewable penetration… Longer-term the prospects for [all] gas generation are going to be weaker.”

S&P’s report largely echoes an assessment by its rival Moody’s, released in September. According to Moody’s, the state’s new legislation was “credit negative” for companies Calpine Corporation, NRG Energy, Pacific Gas & Electric Company (PG&E), Southern California Edison Company, Los Angeles Department of Water and Power.

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