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

DBRS Limited (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. (the Issuer). The Issuer is indirectly owned by Northland Power Inc. (NPI), 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 (SaskPower; 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 as well as 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.

DBRS has changed its projections for the financial performance of the Issuer, employing updated macroeconomic assumptions. Operational and contractual assumptions remain unchanged. Based on a 98.0% Project availability, the minimum projected debt service coverage ratio (DSCR) is 1.66 times (x). The DSCR is projected to be in the 1.66x to 1.70x range over the life of the Bonds, commensurate with the rating.

The DSCR as calculated by DBRS for 2014 was 1.70x and the Issuer’s calculation is almost identical at 1.71x. The Project demonstrated continued good availability performance at 99.5%. Fuel costs were 100.0% passed through to SaskPower because the Project was dispatched at partial load.

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 methodology is Rating Project Finance (August 2014), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.