DBRS Confirms FortisBC Energy Inc. at “A” and R-1 (low) and FortisBC Holdings Inc. at BBB (high), Stable Trends

DBRS has today confirmed the Issuer Rating, MTNs & Unsecured Debentures and Purchase Money Mortgages of FortisBC Energy Inc. (FEI) at “A,” and its Commercial Paper at R-1 (low). DBRS has also confirmed the Medium-Term Note Debentures of FortisBC Holdings Inc. (FHI) at BBB (high). All trends are Stable.

On May 23, 2014, the Province of British Columbia gave consent for the amalgamation of the FortisBC Energy Utilities (FEU) (the Amalgamation). The amalgamated entity, which consists of FEI, FortisBC Energy (Vancouver Island) Inc. (FEVI), FortisBC Energy (Whistler) Inc. (FEW) and Terasen Gas Holdings Inc., will be known as FortisBC Energy Inc.

The confirmation of FEI’s ratings reflects DBRS’s view that the Amalgamation is credit neutral to FEI’s credit profile:

(1) The business risk profile of the amalgamated entity would not be materially different from FEI’s current business risk level. The amalgamated entity will have a larger customer base than FEI, and the risk attributable to FEVI and FEW’s competitive position and smaller size will be mitigated.

(2) The British Columbia Utilities Commission (BCUC) has approved the adoption of the existing FEI rate structures following the legal date of the Amalgamation as proposed by the FEU. The FEU proposed to use FEI’s existing rate design methodologies as a basis for the rate design for the customers of FEI (see the DBRS press release, DBRS Comments on BCUC’s Decision on FEU Amalgamation, Rate Design Application, dated February 27, 2014). The FEU is expected to file later this year for approval of common rates and the phase in approach.

The confirmation of FHI’s rating follows the confirmation of FEI’s ratings and reflects structural subordination of debt at FHI to FEI.

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 methodologies are Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (January 2014), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (February 2014) and Rating Holding Companies and Their Subsidiaries (January 2014), which can be found on the DBRS website under Methodologies.

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