S&P: Aquila unaffected by PPA exit

Standard & Poor's said Aquila Inc.'s (B-/negative/--) announcement that it plans to exit the power purchase agreement (PPA) it has with LSP Energy LP will not immediately affect the credit rating on the $326 million senior secured bonds co-issued by LSP Energy LP and LSP Batesville Funding Corp. (together, LSP Batesville, B-/negative/--).

S&P said Aquila's announcement requires that LSP Batesville agree to the assignment of the PPA to a third party. LSP Batesville has not yet agreed to the assignment of the contract.

Before it can agree, S&P said LSP Batesville is required to certify that the assignment will not result in a material adverse affect, according to the terms of its bond indenture.

Should it agree to the assignment of the PPA to South Mississippi Electric Power Association, S&P said it would need to evaluate the creditworthiness of SMEPA and its economic incentives with regards to the PPA to determine the credit effect on the LSP Batesville bonds.

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