DBRS Updates Report on FortisBC Energy Inc.

DBRS Limited (DBRS) has today published an updated report on FortisBC Energy Inc. (FEI or the Company). On January 6, 2015, DBRS confirmed the Issuer Rating as well as the MTNs & Unsecured Debentures and Purchase Money Mortgages ratings of FEI at “A” and its Commercial Paper rating at R-1 (low). 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 pre-amalgamation business risk level. The amalgamated entity will have a larger customer base than FEI’s pre-amalgamation customer base, and the risk previously attributable to FEVI’s and FEW’s competitive position and smaller size is eliminated.

(2) The British Columbia Utilities Commission (BCUC) has approved the adoption of common rates to be phased in over a three-year period 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 Plan 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 being 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.

(4) Starting in 2015, the new amalgamated entity will have a return on equity of 8.75% and a deemed equity component of the capital structure of 38.5%, which is unchanged from 2014 for FEI. As a result, FEI’s financial metrics are expected to remain within DBRS’s “A” rating guidelines.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 2014), which can be found on our website under Methodologies.

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

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.