DBRS Confirms Brilliant Power Corporation at A (high)

DBRS has today confirmed the ratings of Brilliant Power Corporation’s (BPC or the Company) Series A, B and C Project Bonds (collectively, the Project Bonds) at A (high), all with Stable trends. BPC is a single-purpose entity whose sole business is to own and operate a 145 megawatt hydroelectric power generation project (the Project) in the Kootenay region of British Columbia. The ratings reflect the predictable earnings from long-term power purchase agreements (PPAs) supported by British Columbia Hydro & Power Authority (BC Hydro; rated AA (high)), contractual transfer of hydrology risk to BC Hydro and amortization of the Project Bonds within the terms of the PPAs through 2026.

The long-term PPA is with FortisBC Inc. (FortisBC; rated A (low)) and backstopped by a sales agreement (Backstop PPA) with British Columbia Power Exchange Corporation (Powerex), a wholly owned subsidiary of BC Hydro. Under the Canal Plant Agreement with BC Hydro, the project swapped its hydroelectric production to a predetermined energy and capacity “entitlement” from BC Hydro, eliminating the project’s hydrology risk. BPC’s bond ratings, therefore, partly reflect BC Hydro’s credit strength and undertaking in the project.

The PPA rate structure, together with the transfer of hydrology risk, resulted in predictable cash flow and debt service coverage ratios (DSCR) for BPC. Cash flow has been sufficient to cover all expenses, including interest and principal payments as well as maintenance capital expenditures (capex). Capex is recovered under the PPA in later years, which may cause an interim decline in DSCR. However, high certainty of recovery and low risk of timing delay are viewed as consistent with the current rating category. The DSCR for the most recent 12-month period ended September 30, 2013, was 1.7 times, consistent with the current ratings.

Notes:
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 Project Finance, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.