TEXT-Moody's release on Crockett Cogeneration

(The following statement was released by the rating agency)

Approximately $263 Million of Debt Securities Affected

Dec 14 - Moody's Investors Service affirmed Crockett Cogeneration's (Crockett or Project) Baa3 senior secured rating and changed the rating's outlook to negative from stable.

The rating action reflects weakened financial performance demonstrated by a decrease in Crockett's consolidated debt service coverage ratio to approximately 1.1 times, which is notably lower than projected.

The deteriorating financial performance has been driven in large part by a drop in dispatch by Crockett's offtaker, Pacific Gas and Electric (PG&E). In the near term, Crockett expects to enter into various amendments (Amendments) to several of its project agreements to reduce perceived disincentives to dispatching the Project.

The Amendments as a whole are generally considered positive for the Project and implementation of the Amendments are projected to result in a noticeable increase in dispatch by PG&E. The Amendments are expected to expire at the end of December 2009.

While Moody's expects Crockett's debt service coverage ratios to improve after implementation of the Amendments, the negative outlook incorporates Moody's view that Crockett could continue to experience lower than originally projected dispatch levels resulting in debt service coverage ratios below 1.40 times over the next couple of years.

However, sustained debt service coverages at or below current levels could exert further negative pressures on the Project's rating. Starting in 2010, Crockett is expected to have control over its dispatch levels and Moody's expects the Project to achieve coverage ratios in excess of 1.45 times. Failure by the Project to improve its coverage ratios in excess of 1.45 times starting in 2010 is likely to have negative rating implications.

Crockett owns a 240 MW gas fired cogeneration plant located at the C&H sugar refinery in Crockett, California.

The entire electric output is sold to PG&E (sr sec rated A3) under a 30-year PPA and the steam is sold to C&H under a long-term steam services agreement.