Research: Rating Action: Moody’s Revises St. Joseph Energy Center’s Outlook to Negative from Stable; Ba3 classification confirmed

Approximately $400 million of credit facilities affected

New York, July 18, 2022 — Moody’s Investors Service (“Moody’s”) has revised the outlook for St. Joseph Energy Center, LLC (SJEC or Project) from negative to stable and affirmed the Ba3 rating on its secured credit facilities Senior Loan, consisting of a $369 million Term Loan B and $38.9 million of revolving credit facilities.


“The change in St. Joseph Energy Center’s outlook from stable to negative reflects our expectation of improved financial performance as stronger energy margins in 2022 and 2023 contribute to excess cash flow above previous guidance,” said said Gayle Podurgiel, VP-Senior Analyst. SJEC is a highly efficient combined cycle gas turbine that operates at a capacity factor of 70-80% and benefits from today’s high electricity market prices. This is driving margin expansion, with credit metrics expected to continue to improve in 2022 and 2023.

The project’s strong energy margins are helping to mitigate the continued decline in capacity prices which recently saw PJM Interconnection’s capacity auction results (Aa2 stable) for 2023/2024 settle at $34.13/MW-day for the wider Regional Transportation Organization (RTO) region. This is down from the previous year’s auction of $50/MW-day that is now in effect for the 2022/2023 auction planning year, which runs from June to May, and a strong compression compared to the 2021/2022 price of $140/MW-day. While the decline in capacity auction results will limit project cash flow generation, the change in market dynamics more than offsets this concern over the next 12 to 18 months, as projected energy margins are well above our expectations from a year ago.

The Ba3 credit rating continues to reflect the position of the SJEC project as a new highly efficient and competitive combined cycle gas turbine power plant, serving as a base load unit in PJM. The credit profile remains tempered by its continued exposure to traders, with some nodal basis risk relative to AEP-Dayton Hub, more expensive fuel relative to other gas sources in the region, as well as a characteristic 50% lower excess cash flow sweep compared to its counterparts at a single PJM asset. SJEC has set up mobile coverage to manage its exposure to merchants.

Credit metrics have strengthened in line with higher electricity prices and now straddle the B/Ba category range within the guidelines outlined in our rating methodology. For the twelve months ended March 31, 2022, the SJEC produced a debt service coverage ratio of 2x, projected cash flow from debt operations of 9% and debt to EBITDA of 6x. We expect metrics to improve significantly in 2022 to levels comfortably within the Ba range, with DSCR above 2x, PCFO/debt above 10% and debt/EBITDA below 6x. This should allow the project to repay the debt at a faster rate than expected.


SJEC’s liquidity is adequate, provided by a $7.9 million working capital facility, a $31 million revolving credit facility and supported by a 6-month letter-backed debt service reserve. credit. The reserve for major repairs is discretionary.


The stable outlook reflects our view that strong energy margins will continue through 2022 and 2023 and will help the project sustain recent improvement in financial metrics, despite declining capacity prices. The stable outlook also reflects our expectation of strong operational performance with minimal prolonged forced outages.



• If financial performance improves further such that DSCR exceeds 2.5x and CFO/debt approaches 15% on a sustainable basis

• Significantly stronger capacity auction results in upcoming auctions compared to Moody’s assumptions, coupled with continued strong energy margins leading to cash flow well above current expectations


• If financial performance deteriorates such that DSCR is expected to be less than 1.6x and project CFO/debt is less than 8% during a holding period

• Compression of the energy margin at the end of 2023 and 2024, associated with continued low capacity auction price results for the upcoming auction


SJEC is located in St. Joseph County, Indiana, near the city of New Carlisle. The project includes two Siemens SGT6-5000F(5ee) CTGs, two Nooter/Eriksen HRSGs and one Siemens STG with a nominal capacity of approximately 709 megawatts. HRSGs are fitted with flue burners to supplement plant capacity, subject to permitted fuel flow restrictions.

The project was substantially completed on April 1, 2018 and final completion on November 28, 2018.

Project sponsors include two separate funds managed by Ares EIF Management, LLC for 80% equity, with Toyota Tsusho America Inc. holding the remaining 20%. Both sponsors have experience in the US electricity market, in particular through investments in combined cycle power plants.


The primary methodology used in these ratings was the Power Generation Projects Methodology published in January 2022 and available at Otherwise, please see the Scoring Methodologies page on for a copy of this methodology.


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Gayle Podurgiel
Vice President – Senior Analyst
Project Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

A. J. Sabatelle
Associate General Manager
Project Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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Moody’s Investors Service, Inc.
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