Noting it has made some “minor tweaks” to its portfolio of public-sector bond financing packages, the Southern California Public Power Authority (SCPPA) executive director said Tuesday that none of the authority’s renewable and other energy projects currently being pursued have been affected by the subprime mortgage market meltdown that continues to adversely affect some of its counterparties. Standard & Poor’s Ratings Services (S&P) reiterated double-A level credit ratings for SCPPA.

S&P reaffirmed the SCPPA ratings as it moved last Wednesday to place a “negative” outlook on American International Group Inc. and one of its subsidiaries, which provides interest payment assurances on hundreds of millions, if not billions, of dollars of project financing bonds that SCPPA sells on behalf of its dozen public-sector utilities in Southern California. The rating outlook impacts SCPPA’s gas supplier in some long-term pre-paid natural gas supply deals for its members (see Daily GPI, Feb. 15).

The rating on SCPPA’s pre-pay gas deal is tied to J. Aron & Co., the supplier, and Goldman Sachs guarantees J. Aron’s obligations under the pre-paid SCPPA deal, S&P said.

“The insurance companies are taking a bath right now,” said Bill Carnahan, SCPPA executive director. “What used to be like the ‘Good Housekeeping Seal of Approval’ has gotten so it doesn’t mean anything anymore. As a result we don’t get the lower interest rates, so what we’re doing on variable interest bonds being held to counteract our interest rates on existing bonds going up a little bit is to switch from variable to fixed interest rates.”

Wall Street’s mess tied to the expansion of banks and insurance companies into buying too big a share in the subprime industry has nothing directly to with the utility business, Carnahan said. “Our credit is based on the ratings of our members, and they are all fine.”

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