Representatives for the massive Topaz Solar Farm in the Carrizo Plains are keeping an eye on PG&E, now that the farm’s only source of revenue seems poised to declare bankruptcy.
The 550-megawatt photovoltaic solar farm in eastern San Luis Obispo County relies on the cash-strapped public utility. By contract, PG&E purchases 100 percent of the electricity produced at the farm.
“Topaz is monitoring the dynamic situation surrounding PG&E’s financial situation,” Jessi Strawn, director of corporate communications for Berkshire Hathaway Energy, wrote in an email to The Tribune on Tuesday. “Topaz continues to perform obligations under its power purchase agreement.”
“Maintaining financially healthy utilities in California is good for current and future renewable energy investments in the state,” Strawn added, “and is important for meeting the state’s renewable energy goals.”
Berkshire Hathaway Energy, also known as BHE Renewables, owns the farm.
PG&E’s potential bankruptcy is already taking a toll on the solar farm’s credit rating.
S&P Global Ratings downgraded Topaz Solar Farm’s credit rating from “BBB” to “B” on Jan. 10— a downgrade that pushed the farm’s rating into “junk” status.
Corporations whose credit rating is below a “BBB” are typically more susceptible to defaulting on payments, and for those with a “B” rating, “adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation,” according to S&P’s ratings guide.
In its decision to downgrade Topaz, S&P noted the solar farm “receives all of its revenue from PG&E under a long-term power purchase and sale agreement (PPSA). Our rating on the solar project is currently capped by our view of the credit quality of PG&E, its utility offtaker.”
S&P also downgraded PG&E’s credit rating to “B” last week.
S&P kept Topaz Solar Farm on its Creditwatch negative listing — meaning its rating could still go down — to reflect “the increasing risk that we will downgrade PG&E by one or more notches over the next few months.”
If S&P lowers its PG&E ratings again, it could do the same to Topaz Farms, it said.
PG&E’s potential bankruptcy filing could trigger a cross default for Topaz’s financing, S&P warned, unless the power contract with PG&E is replaced within 90 days of the filing.
Strawn declined to comment further on the farm’s relationship with PG&E, or whether it was seeking other purchasers of its electricity. She also declined to disclose how many people work at the farm.
According to its website, Topaz Solar Farm has added $417 million into the local economy — including $192 million for the roughly 400 construction jobs required to build the plant between 2012 and 2014. That total also included “$52 million in economic output for local suppliers, $14 million in sales taxes during construction and up to $400,000 per year in new property tax revenues,” according to the website.
The farm spans about 4,700 acres and provides enough electricity to power more than 180,000 average California households, according to the website.
Carrizo Plains solar farm’s credit rating drops to ‘junk’ as PG&E bankruptcy looms, by Kaytlyn Leslie, The Tribune, January 16, 2019.