DBRS Confirms Spy Hill Power L.P. at “A” with a Stable Trend

DBRS has today confirmed the rating of “A” with a Stable trend on the Series A Senior Secured Amortizing Bonds (the Bonds) issued by Spy Hill Power L.P (Spy Hill, the Issuer or ProjectCo). Spy Hill is indirectly owned by Northland Power Inc., an experienced owner and operator of power generation assets. The Issuer is a special-purpose entity that owns a simple-cycle, natural gas-fired 86 megawatt power generation facility (the Project), which commenced commercial operations on October 19, 2011. The Issuer benefits from a 25-year peaking power purchase agreement (PPA) with Saskatchewan Power Corporation (rated AA with a Stable trend by DBRS) to provide electrical power to the Saskatchewan transmission system. The Bonds are secured by the Project’s assets.

The PPA insulates the Issuer from electricity price and demand and fuel price and supply risks. The remaining primary risk for the Issuer is performance risk. It must meet certain availability and generation requirements or pay liquidated damages, and meet specific heat rate requirements or pay a higher operating cost.

The rating continues to be supported by: (1) the PPA, which exceeds the maturity of the Bonds by six months; (2) two full years of good operating performance; (3) proven track record of the General Electric (GE) LM6000 turbine-generator technology; (4) contractual services agreement (CSA) with GE affiliates for annual turbine maintenance and one major overhaul (expected to cover the full term of the PPA); and (5) a forecast minimum senior debt service coverage ratio (DSCR) of approximately 1.68 times (x). In 2013, the DSCR was 1.81x according to the Issuer’s calculation (1.74x according to DBRS); the Availability Tariff revenue exceeded the forecast and the non-fuel operating costs were slightly lower.

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 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.

DBRS’s rating definitions and the terms of use of such ratings are available at www.dbrs.com.

The full report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.