As goes Goldman Sachs Group Inc., so go three public-sector energy finance units’ natural gas projects in California and Tennessee, according to reports released Friday by Standard & Poor’s Ratings Services. In each case, S&P determined that the credit rating downgrades of financing insurance giant MBIA Insurance Corp. will not affect the gas supply projects.

Involved in separate determinations by S&P were Southern California Public Power Authority (SCPPA), Northern California Gas Authority (NCGA) and the Tennessee Energy Acquisition Corp. (TEAC), which collectively have $3.4 billion in bonds tied to natural gas supply projects for public-sector electricity providers. Goldman Sachs separately guaranteed each of the bond offerings and S&P said the public power financing units’ credit ratings could be revised only if Goldman’s rating was revised.

MBIA, which has had its credit rating downgraded and placed on the S&P CreditWatch designated negative, is involved in insuring bond dividend payments for each of the deals.

S&P said that unaffected by the MBIA downgrades and outlook are TEAC’s $2.2 billion in 2006A bonds; NCGA’s $757 million in bonds; and SCPPA’s $505 million of bonds. The SCPPA and NCGA bonds are tied to billion-dollar long-term natural gas supply prepayments for their public-sector electric utility generation members that are part of the state-chartered joint powers authorities.

TEAC, which was established 12 years ago by two municipal utilities in Springfield and Clarksville, TN, has $2.2 billion in gas project revenue bonds tied to its supplier, J. Aron &Co., which is also the supplier in the SCPPA gas prepay deal.

“Goldman Sachs guarantees J. Aron’s obligation, and [we] could lower the rating on the bonds if we further lower the rating on MBIA, and MBIA does not post sufficient collateral to protect bondholders from losses in any early termination [of the deal],” S&P said regarding the TEAC bonds.

For SCPPA and NCGA, the insurance company is relied upon by bondholders to cover debt service and/or commodity swap payments in the case of one of the public-sector participants defaults, S&P said.

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.