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NEW YORK, NY, Dec. 19, 2002 -- Since the California power crisis began, more than 20 U.S. power projects have suffered rating downgrades, according to a report published today by Standard & Poor's Ratings Services.
However, true project-related risks, such as construction and operations, have not been the primary reason for any of those rating cuts. Of the downgrades, seven were due to a decline in the credit quality of the projects' sponsor/owner and the remainder were due to deterioration in counterparty creditworthiness.
"The driving forces behind the deteriorating creditworthiness of the sponsors and counterparties include depressed market prices for electricity, weakening financial profiles, and liquidity and financing flexibility problems," according to Standard & Poor's credit analyst Elif Acar.
Counterparty creditworthiness is especially important to a project rating when the project relies on the counterparty for its entire revenue source. Standard & Poor's generally will not rate a project higher than a counterparty unless the counterparty may be easily replaced or the project would be rated higher without the counterparty.
The report, titled "U.S. Power Projects Suffer From Sponsor, Counterparty Credit Slide," is available on RatingsDirect, Standard & Poor's Web-based credit research and analysis system.
Standard & Poor's provides widely recognized financial data, analytical research, and investment and credit opinions to the global capital markets. For more information, visit our Web site at http://www.standardandpoors.com .
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