Credit quality for North American non-utility merchant and contracted power companies has improved moderately compared with last year, boosted by robust capacity auctions and energy margins. The proportion of investment-grade ratings, defined as 'BBB-' and higher, is broadly similar at about 25% of the 57 issuers rated publicly by S&P Global Ratings. Our rating outlooks within the sector are mostly stable, at about 87% as of April 2025, for corporate and project developer issuers, compared with 82% in April 2024. Similarly, most project finance issuer rating outlooks (88%) are at stable as of April 2025, compared with 75% in April 2024. This improvement reflects favorable dynamics in the power space, such as increasing capacity prices in some markets like the PJM Interconnection (PJM) and greater power demand, combined with asset retirements. This favorable environment has also led to several refinancing transactions, which have pushed out the term loan B (TLB) maturities that merchant project finance issuers typically use in their financing.

Our Rankings

The following lists rank the North American non-utility merchant and contracted power companies that S&P Global Ratings rates, from strongest to weakest. We rank companies, in turn, by the rating, outlook, stand-alone credit profile (SACP), business and financial risk profiles, and liquidity assessment. We rank investment-grade companies by business risk profile, then financial risk profile. We order speculative-grade companies by financial risk profile, then business risk profile. We then list companies in alphabetical order, if not distinguished by these factors.

We rank project finance entities by rating, outlook, operations phase business assessment (OPBA), preliminary SACP, downside mapping, liquidity, comparable rating assessment, debt structure, and transaction structure. We order projects by rating and outlook. We then list them in alphabetical order, if not distinguished by these factors.

In line with our corporate, project finance, and project developer rating methodologies, the final rating might differ from the SACP, where government, group, or rating above the sovereign considerations apply. Where the SACP differs from the anchor, we have applied one or more modifiers. We've noted the anchor and active modifiers of each company for informational purposes only. Please refer to the company-specific pages on RatingsDirect via the hyperlinks in the tables below.

Given our industry risk assessment for the power sector, country risk has no material impact on the corporate industry and country risk assessment or final OPBA because the rated companies are based in jurisdictions where we assess country risk as very low.

The tables and charts in this article provide an overview of 56 North American merchant power companies, spread across our corporate, project finance, and project developer criteria. The distribution of these 56 companies is shown in chart 1.

Chart 1

We publicly rate 24 merchant power projects. All are rated speculative grade ('BB+' and below) with 75% in the 'BB' category and 21% in the 'B' category. This represents an improvement in credit quality compared with last year, where about 52% of the projects were in the 'BB' category and 48% were in the 'B' category. This improved credit quality was spurred by a favorable environment for power producers, particularly in PJM where we expect capacity prices in upcoming auctions will be robust. We have seen some new power projects being formed through consolidation, such as Cogentrix Finance Holdco and Cornerstone Generation LLC.

Table 1

We publicly rate nine contracted or partially contracted power projects; 70% of the ratings are investment grade and 30% are speculative grade, which is largely in line with last year.

Table 2

We publicly rate 16 corporate merchant power companies; 20% are investment grade and 80% are speculative grade, which is in line with last year's distribution. There has been a slight improvement in the speculative-grade issuer credit quality, with no companies rated lower than 'B+'. We also now include Pattern Energy Operations L.P. under our corporate methodology, as the company was no longer meeting the minimum diversity requirement to be rated under our project developer methodology.

The industry continues to consolidate. For example, Lightning Power LLC and Alpha Generation LLC are newly formed independent power producers and include in their fleet some assets that we previously rated on a stand-alone basis under our project finance methodology. Furthermore, Constellation Energy Generation LLC has announced that it will acquire Calpine Corp., TransAlta Corp. acquired Heartland Generation, and Vistra Corp. acquired the 15% minority interest in Vistra Vision LLC that it didn't already own.

Table 3

We publicly rate seven project developers; similar to last year's distribution, about half of them are investment grade.

Table 4

Rating Distribution

The overall rating distribution is broadly consistent with last year's rankings, with about 25% of the issuers being rated 'BBB-' or above.

Chart 2

Outlook And CreditWatch Distribution

Our rating outlooks are mostly stable. The power project ratings have a stronger outlook: 88% of the projects that we rate have a stable outlook compared with 75% last year, while only 6% have a negative outlook compared with 22% last year. Merchant power providers are benefiting from positive tailwinds, including more robust capacity auctions in PJM, combined with growth in power demand, which should be reflected in strong energy margins.

Chart 3

Chart 4

Business Risk Profile Distribution

Of the 23 issuers rated under S&P Global Ratings' corporate (16) and project developer (seven) criteria, 90% of our business risk assessments are either satisfactory or fair. These assessments typically reflect some degree of cash flow visibility due to contractual agreements and some scale. We also assess two companies as having a business risk profile of strong, Constellation Energy Generation LLC and XPLR Infrastructure L.P. (formerly NextEra Energy Partners L.P.).

Chart 5

Operations Phase Business Assessment Distribution

Of the 33 issuers rated under our project finance criteria, there is a diverse range of OPBAs. All the projects that we view as merchant (24) have an OPBA of 9 or higher, primarily due to their inherent market risk exposure. The contracted power projects have a wider range of OPBAs, spurred by different underlying technologies and contractual profiles.

Chart 6

Project Finance Upgrade and Downgrade Metrics

Here we show the quantitative ratings upgrade and downgrade metrics, organized by rating category. Although many project entities are closer to the downside trigger, we note the projected minimum debt service coverage ratio (DSCR) often occurs later in the asset's life, and we view near-term DCSRs to be generally strong (given our positive outlook on the sector). Therefore, we do not expect to raise or lower most project finance ratings.

Chart 7

Debt Maturity Distribution

Most of the publicly rated power project financings are financed with TLB structures that have a seven-year term. Given the strong momentum for power, we have seen several refinancing transactions that have pushed out the maturity of merchant projects that we rate. As a result, about 50% of loans mature within five years, compared with about 80% last year. Only have two merchant power project financings are maturing within the next two years: Elwood Energy LLC and West Deptford Energy Holdings LLC. The longer-dated maturities all correspond to fully or partially contracted power projects that are financed with fully amortizing loan structures.

We have also seen several repricing transactions and amendments to the terms of the credit agreements, which have largely been credit neutral. Most TLB repricings have resulted in lower spreads, reflecting market technical factors as well as supportive fundamentals.

Chart 8