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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.

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