Wednesday, November 3, 2010

The very expensive Fitch Ratings ‘Mine-Mouth Report’ on Prairie State


In the last post about the Fitch Ratings credit warning to the six municipal investors of Prairie State rated by Fitch, at the bottom of the press release there was reference to the full research report the press release was taken from entitled, Prairie State Energy Campus Review: Finding the Bottom of a Mine-Mouth Coal Plant.”

Unfortunately Fitch charges over $200 for this interesting in-depth report so I put out an all-call on the Internet and within days the report magically dropped into my inbox. The report expanded on the press release and also contained an investor-by-investor credit summary for six of the eight public municipal consortium investors that are rated by Fitch. The details are interesting if not exhaustive and if this is all Fitch knows about these municipal investment entities I suggest they go back to work and get a more in-depth view of the finances of the municipalities who are the collateral behind the consortium investors who are behind the multi-consortium investors who are behind the financing of this coal-fired power plant with what may possibly be the largest cost overruns (going on $5 billion now and counting) in the history of coal-fired power plants.

Fitch will not be pleased that their pricy $275 report is loose out there in net-space but if so they need to adjust their thinking to fit their new clientele. Secret reports and decoder rings worked in the old days when the top ten investment banks in the US backed big power projects financed by private investment. Then Fitch worked for private companies and commercial investors that were entitled by law to keep proprietary information secret. But the world of investment in power projects has been flipped on its head. Since 2007, the Big Ten won’t touch dirty coal plants with a ten-gigabyte pole and since King Coal sucked Little Town USA into providing the billions in financing to these publicly financed projects with public money the access rules on such reports have changed. The operative words are not “proprietary information” but “public right-to-know.”

These days, to provide their credit and investment reports, Fitch takes public money derived from taxes acquired from taxes levied by public governments that make up the public joint agencies. Those reports are all covered under public disclosure and open record laws common to every state. In Missouri those laws are contained in Chapter 610 called “Sunshine Laws” for obvious reasons – the cleansing effect sunshine has on public affairs.

So, here is the full secret Fitch report on the increasingly wobbly credit of six of the Fitch rated public investors of the Prairie State coal-fired plant and their individual credit summaries that produced the October 17, 2010 credit warning by Fitch Ratings. Get out your secret decoder rings and enjoy…. 


Prairie State Energy Campus Review: Finding the Bottom of a Mine-Mouth Coal Plant”
Impact of PSEC’s Revised EPC Contract Will Not Be Uniform

The owners of Prairie State Energy Campus (PSEC) have issued nearly $5 billion of debt to finance the construction of a mine-mouth, super critical coal-fired power plant. The contract revision and amendment announced on July 22, 2010 increased the price of the engineering, procurement, and construction (EPC) contract, but also limited the impact of further cost increases and delays. Fitch rates six of the eight owners of PSEC, which will compose a significant portion of each owner’s future resource mix. Therefore, project delays, cost increases, and operational performance of the PSEC have the potential to impact each owner’s credit profile and rating. The credit impact will not be uniform across the owner systems, but will depend on each member’s share of PSEC as a percentage of its resource mix, as well as its ability to absorb or pass through cost increases. Full Report…