DBRS Confirms FortisBC Holdings Inc. at BBB (high), Stable Trend

DBRS has today confirmed the rating of the Medium-Term Note Debentures (MTNs) of FortisBC Holdings Inc. (FHI or the Company) at BBB (high) with a Stable trend. The rating of FHI is based on the following factors:

(1) Reasonable dividends and investment income from its regulated utilities: FortisBC Energy Inc. (FEI; rated “A”), FortisBC Energy (Vancouver Island) Inc. (FEVI) and FortisBC Energy (Whistler) Inc. (FEW). DBRS’s focus is mainly on FEI and FEVI, which accounted for over 90% of consolidated cash flow of the Company for the 12 months ended December 31, 2013 (DBRS estimates). These utilities have stable cash flow generated from regulated natural gas transmission, distribution and storage operations.

(2) Strong non-consolidated credit metrics. FHI’s third party-debt-to-capital ratio of 6.5% (excluding inter-company debt) and cash flow before interest (CFBI)-to-third party interest ratio of 22.88 times for 2013.

(3) Good financial support from the parent. At the end of 2012, approximately 87% of FHI’s total debt was owed to its parent, Fortis Inc. (rated A (low), UR Developing). Third party debt has been reduced to $125 million by the end of 2013 from $254 million in 2009 from loans provided by Fortis Inc.

FHI’s rating, which is two notches lower than FEI’s, reflects the following: (a) debt at FHI is structurally subordinate to debt at FEI; (b) debt at FHI is also structurally subordinate to the debt at FEVI, which has weaker creditworthiness than FEI due to its significantly smaller operations and customer base; and (c) restrictive ring-fencing conditions imposed on FEI, FEVI and FEW by the regulator, with respect to dividend payouts to FHI and their capital structures.

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.

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

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