DBRS Removes Brookfield Renewable Energy Partners LP from Under Review with Developing Implications

DBRS has today removed Brookfield Renewable Energy Partners LP’s (BREP or the Company) ratings from Under Review with Developing Implications. DBRS has also confirmed the Issuer Rating and Senior Unsecured Debentures and Notes at BBB (high) and the Class A Preference Shares at Pfd-3 (high), all with Stable trends. With the establishment of non-recourse bridge financing for the acquisition of White Pine Hydro Investments, LLC (the Acquisition; White Pine), the planned issuance of preferred shares on a bought deal basis and expected equity injection from institutional partners, DBRS is comfortable with the Company’s funding strategy, which includes appropriate measures to maintain a reasonable financial profile while executing its growth strategy.

On December 31, 2012, DBRS placed BREP Under Review with Developing Implications. DBRS’s rating action reflected DBRS’s concern about the potential increase in the Company’s deconsolidated debt-to-capital ratio, which could increase to approximately 28% if BREP uses 100% recourse debt at the parent level to finance the Acquisition (closed on March 1, 2013), which included approximately $700 million of total debt ($575 million at the subsidiary level and $125 million at the holding company level). At that time, DBRS stated that the Under Review with Developing Implications status would be resolved once financing has actually been put in place (See DBRS’s press release DBRS Places Brookfield Renewable Energy Partners LP Under Review with Developing Implications, dated December 31, 2012).

Following the completion of the Acquisition, the Company has committed to tendering the $700 million of existing debt at White Pine with $350 million of non-recourse bridge financing and $350 million of drawings from BREP’s credit facility and available cash. Concurrently, the Company plans to issue an additional $125 million (up to $175 million) of preferred equity to repay drawings on BREP’s credit facility. The Company also expects to receive equity funding from its institutional partners such that there will be no material incremental drawings on BREP’s credit facility relating to the tendering of the existing debt at White Pine.

Based on BREP’s financing plan, DBRS conducted a pro forma analysis with a financing plan of $350 million non-recourse bridge financing, equity from institutional partners and $125 million of preferred equity issuance.

Based on DBRS’s pro forma calculations, the Company’s credit metrics would be in line with its current rating category with (1) deconsolidated debt-to-capital ratio at approximately 20%, (2) deconsolidated cash flow-to-deconsolidated debt ratio at approximately 18% and (3) deconsolidated cash flow-to-deconsolidated interest coverage at approximately 4.9 times.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Non-Regulated Electric Generation Industry (May 2011), which can be found on our website under Methodologies.