Credit quality for the project finance sector is broadly unchanged from last year. S&P Global Ratings rates about 330 project finance issuers and has public ratings on 263 of those (the others being private or confidential ratings).

The proportion of investment-grade project finance issue credit ratings, defined as 'BBB-' and higher, is about 72%.

When a project has an external guarantee of its debt, such as an insurance wrap, we differentiate the underlying project stand-alone credit profile (Project SACP) from the issue credit rating on the project (Project ICR). For 54 of the issuers, insurance wraps bring the issue credit rating to 'AA' while the underlying project in these deals is assessed separately and would typically have a lower rating or might not have a rating at the project level.

The percentage of project ICRs that have stable outlooks is 79% while 75% of underlying project SACPs have stable outlooks. About 15% of project ICRs have a negative outlook or are on CreditWatch with negative implications while 5% have a positive outlook or are on CreditWatch with positive implications. For underlying project SACPs, 17% have negative outlooks or are on CreditWatch with negative implications while 5% have positive outlooks or are on CreditWatch with positive implications.

We have seen several downgrades and an increase in negative outlooks over the past year, with the main sectors with negative outlooks at the project level including some of the private finance initiative transactions in the U.K., some hotel transactions in the U.S. that are still recovering from the COVID-19 downturn, and a number of power projects that have seen either disappointing renewable resource levels or lower-than-expected offtake pricing.

Our Ranking

The following lists rank all project finance transactions for which S&P Global Ratings has a public rating. The lists are separated by region and asset type and then listed from strongest to weakest. We also include the rating subcomponent scores, including operations period business assessment (OPBA), resiliency, other modifiers, and the final operations and construction period SACP.

In line with our corporate, project finance, and project developer rating methodology, the final rating might differ from the SACP, where government, group, or rating above the sovereign considerations apply. Country risk has a minimal impact because a vast majority of projects are in jurisdictions in which we assess country risk as low.

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The following tables list all the publicly rated projects, including rating sub scores for each of the four regions--North America, Europe, Latin America, and Asia-Pacific.

We publicly rate 17 projects in Asia-Pacific across the power, social infrastructure, and transportation sectors.

Table 1

We publicly rate 83 projects in Europe, the Middle East, and Africa, including the commodity and natural resources, power, social infrastructure, and transportation sectors, as well as a small number of projects that don't fall under these four typical categories.

Table 2

We publicly rate 48 projects in Latin America, including the commodity and natural resources, power, social infrastructure, and transportation sectors, as well as a small number of projects that don't fall under these four typical categories.

Table 3

We publicly rate 111 projects in the U.S., Canada, and Bermuda. There are projects in each of the four common categories as well.

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Rating Distribution

In terms of rating distribution, we note that many projects are initially structured to investment grade and the issuers remain heavily weighted to that level of rating. Most of the projects rated in the 'AA' category have that rating due to the impact of an insurance wrap.

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Outlook And CreditWatch Distribution

Our rating outlooks are mostly stable. Our ratings are underpinned by our base case assumptions but also generally factor in some headroom for short-term volatility for more market-exposed projects.

In the power sector, uncertainty about upcoming capacity auctions or price levels means that we have a slight increase in merchant power projects with negative outlooks from last year. Other sectors with a meaningful number of negative outlooks (particular before the impact of insurance wraps) are some of the volume-exposed social infrastructure transactions, student housing in the U.K., and a small number of public-private partnership hospital projects that have faced increased operating costs and operational deductions.

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Operations Phase Business Assessment Distribution

The issuers include projects with a diverse range of OPBAs. All the projects that we view as merchant power have an OPBA of 9 or higher, primarily due to their inherent market risk exposure. The contracted power projects have a wider range of OPBAs, spurred by different underlying technologies and contractual profiles. Volume-exposed transportation deals are typically in the 3-6 range, and volume-exposed social infrastructure deals such as hotels and stadiums typically range from 5-10.

The lower OPBAs are for simple projects with low technology complexity and typically availability-based revenue with no or limited resource or market exposure.

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Related Criteria

• Criteria - Infrastructure - General: General Project Finance Rating Methodology, Dec. 14, 2022
• Criteria - Infrastructure - General: Sector Specific Project Finance Rating Methodology, Dec. 14, 2022