DBRS Confirms Electricity Distributors Finance Corporation at A (low)

DBRS has today confirmed the rating on the Series 2002-1 Certificates (the Certificates) issued by Electricity Distributors Finance Corporation (EDFIN) at A (low) with a Stable trend. The rating is based on the lower rating of two participants, Enwin Utilities Ltd. (Enwin), rated A (low), and PowerStream Inc. (PowerStream), rated “A.”

The Certificates represent undivided co-ownership interests in unsecured debentures issued by two participating local distribution companies (LDC Participants), namely PowerStream and Enwin, to EDFIN. The obligations of the individual LDC Participants are several and not joint, and each LDC Participant is liable only for its obligations and not for the obligations of any others. Default of the obligations to EDFIN of one LDC Participant will result in a proportionate default of the unsecured debentures issued by EDFIN. Therefore, the rating of the Certificates is based on the rating of the lowest-rated LDC Participant, Enwin.

The debt issued through the Certificates was loaned to the LDC Participants through debentures (“Debentures”; with the same maturity date as the Certificates) issued to EDFIN by the LDC Participants. EDFIN then used the cash receipts to pay the interest on the Certificates. The stability of cash flows at the LDC Participants, combined with adequate liquidity, has continued to allow the LDC Participants to make timely and sufficient payments to EDFIN.

EDFIN’s rating is expected to be discontinued when the Certificates mature on August 15, 2012, as the LDC Participants are expected to retire their Debentures issued to EDFIN with their own debt issuances. The refinancing risk (paying back the loans to EDFIN) of Enwin and PowerStream is expected to be modest, given the good liquidity and financial strength of these utilities.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the North American Energy Utilities (Electric and Natural Gas) Industry, which can be found on our website under Methodologies.