articles Ratings /ratings/en/research/articles/240828-capacity-market-assumptions-for-power-corporate-and-project-financings-13229120.xml content esgSubNav
In This List
COMMENTS

Capacity Market Assumptions For Power Corporate And Project Financings

COMMENTS

Instant Insights: Key Takeaways From Our Research

COMMENTS

CreditWeek: How Will COP29 Agreements Support Developing Economies?

COMMENTS

U.S. Media And Entertainment: Looking For The Winds Of Change In 2025

COMMENTS

BDC Assets Show The Prevalence Of Payments-In-Kind Within Private Credit


Capacity Market Assumptions For Power Corporate And Project Financings

The following table provides specific common assumptions used in our "Sector-Specific Project Finance Rating Methodology," published on Dec. 14, 2022.

S&P Global Ratings publishes price decks for specific commodities, such as hydrocarbons, metals, and power capacity markets. These inform our ratings analysis of corporate and project finance issuers.

We make changes to our assumptions to account for changes in market indicators and our view of fundamental supply and demand. We may publish our capacity price forecasts annually, or only when prices move substantially. Typically, our assumptions for corporates focus on the current year (year one) plus the next two years. We use these to determine a base-case financial scenario for issuers over the next two to three years. Our "Sector-Specific Project Finance Rating Methodology" specifies how we derive our baseline price assumptions. When extending prices over the remaining life of the project, we will generally adjust them for inflation.

Base and downside price assumptions are used to determine a project's cash flow volatility, and thus its market risk and business assessment during the operations phase. The baseline price assumptions are also used to determine the financial assessment through the minimum debt service coverage ratio ranges.

Table 1

Common assumptions
Base case Resliency case
(U.S. $) 2022 2024 2025 2026 and beyond
Natural gas price (U.S. Henry Hub; $/mmBtu)* 3.5 2.5 3.5 4.25 2.75
PJM Interconnection
Capacity delivery year June 1-May 31 (all in $/MW-day) 2021-2022 (A) 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2027-2028 2028-2029 Beyond 2029 (Escalate at 2% annually) Resiliency case
EMAAC 165.7 ` 49.49 53.6 269.92 200 175 165 Base price less $25/MW-day
ComEd 195.6 68.96 34.13 28.92 269.92 200 175 150 Base price less $25/MW-day
PS-North 204.3 97.86 49.49 53.79 270.35 200 175 165 Base price less $25/MW-day
MAAC 140 95.79 49.49 49.49 269.92 200 175 150 Base price less $25/MW-day
RTO 140 50 34.13 28.92 269.92 200 175 150 Base price less $25/MW-day
Base-case assumptions for natural gas prices are currently $3.5 per mmBtu for 2025. These may change before our next capacity price update (see "S&P Global Ratings Makes Modest Change To AECO Natural Gas Price Assumption; Other Prices Unchanged", published June 14, 2024. PJM prices are established through delivery years 2025-2026 and are assumptions thereafter. /mmBtu--Per million British thermal units. /MW-day--Per megawatt day. PJM--Pennsylvania-New Jersey-Maryland. MAAC--Mid-Atlantic Area Council. Source: S&P Global Ratings.

This article does not constitute a rating action.

Related Criteria

Related Research

Primary Credit Analyst:Aneesh Prabhu, CFA, FRM, New York + 1 (212) 438 1285;
aneesh.prabhu@spglobal.com
Secondary Contacts:Vishal H Merani, CFA, New York + 1 (212) 438 2679;
vishal.merani@spglobal.com
Luqman Ali, CFA, New York (1) 212-438-0557;
luqman.ali@spglobal.com
Viviane Gosselin, Toronto + 1 (416) 5072542;
viviane.gosselin@spglobal.com
Umair Khan, CFA, New York + 1 (416) 507 2520;
umair.khan@spglobal.com
Diego Weisvein, Englewood + 1 (212) 438 0523;
diego.weisvein@spglobal.com

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

 

Create a free account to unlock the article.

Gain access to exclusive research, events and more.

Already have an account?    Sign in