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

November 3, 2018

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.

…click on the above link to read the rest of the article…

Moody’s Threatens US Downgrade Due To Soaring Debt, “Fiscal Deterioration”

February 9, 2018

Moody’s Threatens US Downgrade Due To Soaring Debt, “Fiscal Deterioration”

Back in 2011, Standard & Poors’ shocked the world, and the Obama administration, when it dared to downgrade the US from its vaunted AAA rating, something that had never happened before (and led to the resignation of S&P’s CEO and a dramatic crackdown on the rating agency led by Tim Geithner).

Nearly seven years later, with the US on the verge of another government shutdown and debt ceiling breach (with the agreement reached only after the midnight hour, literally) this time it is Warren Buffett’s own rating agency, Moody’s, which on Friday morning warned Trump that he too should prepare for a downgrade form the one rater that kept quiet in 2011. The reason: Trump’s – and the Republicans and Democrats – aggressive fiscal policies which will sink the US even deeper into debt insolvency, while widening the budget deficit, resulting in “meaningful fiscal deterioration.”

In short: a US downgrade due to Trumponomics is inevitable. And incidentally, with today’s 2-year debt ceiling extension, it means that once total US debt resets at end of day – unburdened by the debt ceiling – it will be at or just shy of $21 trillion.

We expect if not a full downgrade, then certainly a revision in the outlook from Stable to Negative in the coming  months.

Here’s Moodys:

The stable credit profile of the United States (Aaa stable) is likely to face downward pressure in the long-term, due to meaningful fiscal deterioration amid increasing levels of national debt and a widening federal budget deficit. However, the US economy is very strong, wealthy, dynamic and well diversified, and its role in the global financial system is unmatched. These factors help compensate for the impending fiscal weakness, Moody’s Investors Service says in a new report.

…click on the above link to read the rest of the article…

 

 

Brazil Cut To Junk By All Three Ratings Agencies After Moody’s Joins The Fray

February 24, 2016

Brazil Cut To Junk By All Three Ratings Agencies After Moody’s Joins The Fray

Back in December we warned that Brazil faced a “disastrous downgrade debacle” that would eventually see the beleaguered South American nation cut to junk by all three major ratings agencies.

S&P had already thrown the country into the junk bin and just six days after our warning, Fitch followed suit.

Between the country’s seemingly intractable political crisis and worsening public finances, the outlook is exceptionally dire and just moments ago, Moody’s cut Brazil to junk as well.

  • MOODY’S DOWNGRADES BRAZIL’S ISSUER, BOND RATINGS TO Ba2 W/ A
  • BRAZIL’S ISSUER & BOND RATINGS CUT TO Ba2 BY MOODY’S
  • DETERIORATING DEBT METRICS WILL RESULT IN A MATERIALLY WEAKER CREDIT PROFILE IN THE COMING YEARS

Watch the BRL and the Bovespa. Things likely won’t be pretty.

Below, find the rationale.

*  *  *

From Moody’s

Moody’s downgrades Brazil’s issuer and bond ratings to Ba2 with a negative outlook

The downgrade was driven by

  • The prospect of further deterioration in Brazil’s debt metrics in a low growth environment, with the government’s debt likely to exceed 80% of GDP within three years; and
  • The challenging political dynamics, which will continue to complicate the authorities’ fiscal consolidation efforts and delay structural reforms.

The negative outlook reflects the view that risks are skewed toward an even slower consolidation and recovery, or further shocks emerging, which creates uncertainty over the magnitude of deterioration of Brazil’s debt profile over the rating horizon.

RATIONALE FOR THE DOWNGRADE

Brazil’s credit metrics have deteriorated materially since the Baa3 rating with a stable outlook was assigned in August 2015. That deterioration is expected to continue over the coming three years, given the scale of the shock to the Brazilian economy, the lack of progress made by the government in achieving its fiscal and economic reform objectives and the political dynamics expected to persist over that period.

…click on the above link to read the rest of the article…

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