DBRS Confirms Brilliant Power Corporation’s Project Bonds at A (high), Stable

DBRS Limited (DBRS) has today confirmed the ratings of Brilliant Power Corporation’s (BPC or the Company) Series A, B and C Project Bonds (collectively, the Project Bonds) at A (high) with Stable trends. BPC is a single-purpose entity that owns and operates a 145 megawatt hydroelectric power generation facility and the Brilliant Terminal Station assets in the Kootenay region of British Columbia (the Project). The rating confirmations reflect: (i) the stable and predictable cash flows as a result of the long-term entitlement contract with British Columbia Hydro and Power Authority (BC Hydro) and from the long-term power purchase agreement (PPA) with FortisBC Inc. (FortisBC; rated A (low) by DBRS), (ii) the contractual transfer of hydrology risk to BC Hydro and (iii) the support of the backstop agreement to the PPA (Backstop PPA) from Powerex Corp., a wholly owned non-guaranteed subsidiary of BC Hydro.

Typically, ratings of power generation project debt are constrained by the credit quality of the offtaker; however, BPC benefits from additional features that reflect the implicit support from BC Hydro’s undertaking in the Project through the interlocking contractual structure and the Backstop PPA. Additionally, given the nature of BPC’s reliable low-cost power generation nature, DBRS believes that the PPA will likely be preserved in a default analysis scenario of FortisBC.

Performance of BPC has been stable year over year. Debt service coverage ratio (DSCR) for the most recent fiscal year ended March 31, 2014, was 1.75 times (x) compared with 1.61x in 2013. For the nine months ending December 31, 2014, DSCR was 1.60x compared with 1.70x for the same period last year. Changes in DSCR are primarily a result of changes in sustaining capital expenditure (capex). Capex is typically recovered under the PPA in later years, which may cause interim declines in DSCR.

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 (August 2014), which can be found on our website under Methodologies.

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

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