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

DBRS Limited (DBRS) has today confirmed the Issuer Rating as well as the MTNs & Unsecured Debentures and Purchase Money Mortgages ratings of FortisBC Energy Inc. (FEI) at “A” and its Commercial Paper rating 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. The rating confirmation follows the completion of the amalgamation of FEI, FortisBC Energy (Vancouver Island) Inc. (FEVI), FortisBC Energy (Whistler) Inc. (FEW) and Terasen Gas Holdings Inc. (the Amalgamation) on December 31, 2014. The amalgamated entity is known as FortisBC Energy Inc. (FEI). The confirmation is based on DBRS’s view that the Amalgamation will not have a material impact on FEI’s credit profile, reflecting the following factors:

(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’s current customer base and the risk attributable to FEVI’s and FEW’s competitive position and smaller size will be eliminated.
(2) The British Columbia Utilities Commission (BCUC) has approved the adoption of the common rates for natural gas delivery to all customers of the amalgamated entity except those in the Fort Nelson, British Columbia, service area.
(3) The BCUC issued its decision on FEI’s multi-year Performance Based Ratemaking Plans Application in September 2014 (the multi-year PBR). The term of the multi-year PBR was extended to 2019. The multi-year PBR incorporates a mechanism for improving operating efficiencies, with operation and maintenance costs as well as base capital expenditures subject to a formula during the PBR period. The BCUC also approved a 50/50 sharing of variances from the formula-driven expenditures over the PBR period.

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

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 methodologies are Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 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.