DBRS Confirms Algonquin Power Co. Senior Unsecured Debentures Rating at BBB (low), Stable

DBRS has today confirmed the rating of Algonquin Power Co.’s (APCo or the Company) senior unsecured debentures at BBB (low), with a Stable trend. APCo and its parent company, Algonquin Power & Utilities Corp (APUC) announced an acquisition of four wind power generation facilities, with a total capacity of 480 megawatts, in the United States (the Transaction). Approximately 73% of the expected energy revenues are under long-term off take contracts with an average term of nearly 12 years. Two of the projects achieved commercial operation in February 2012 and two are currently under construction and expected to complete in Q4 2012.

The $888 million acquisition will be through a partnership that is 51% owned by APCo. Tax equity investors will provide $360 million for the acquisition. For APCo’s share ($269 million) of the acquisition costs, the Company intends to fund with 45% debt and 55% equity, with borrowings in total of $120 million by APCo and share issue of $150 million by APUC. The resulting credit metrics are expected to be consistent with APCo’s financial profile prior to the acquisition.

With the acquisition, APCo’s will have a larger and more diversified power generation portfolio with reasonable contract protection and solid operating performance. The Transaction is considered a modest improvement in APCo’s business risk profile.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Non-Regulated Electric Generation Industry, which can be found on our website under Methodologies.