Yellowstone Energy LP Senior Secured Notes #BBB-# Rating Outlook Revised To Positive From Stable

Stocks and Financial Services Press Releases Friday February 9, 2018 08:39
SAN FRANCISCO--9 Feb--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) Feb. 8, 2018-- S&P Global Ratings today revised the outlook on Yellowstone Energy LP's (YELP) senior debt to positive from stable, and affirmed the 'BBB-' rating on YELP's $131.5 million senior secured notes due 2026.

The YELP project is a pet-coke-fueled, circulating–fluidized-bed power plant adjacent to an Exxon Mobil Corp. (Exxon) refinery in Billings, Mont. The plant produces electricity, steam, and ash, and sells its electricity to Northwestern Energy, the utility subsidiary of NorthWestern Corp.(BBB/Stable/-- ), under a 35-year take-and-pay power purchase agreement (PPA) that extends two years beyond the debt maturity. The project's operational performance remains strong and pet coke prices have continued to decline.

If operational performance remains steady, ancillary revenues increase, and supplemental pet coke prices remain negative, our base case financial forecast will likely improve further, leading to higher minimum coverage, which will likely trigger a one-notch upgrade in the next year or two.

Our positive outlook reflects our view that minimum debt service coverage under our base case forecast is likely to increase over the next two years, triggering an upgrade by one notch. Most of the project's revenues derive from a strong PPA with a highly rated offtaker that takes most energy at high fixed prices under a contract that runs beyond the debt's term, providing cash flow stability. Ancillary revenues from ash sales are expected to increase as a result of increased oil drilling in the Bakken. In addition, as the only local consumer of pet coke, we anticipate that supplemental coke prices will likely stay negative, lowering the project's raw material costs.

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