DBRS Confirms AltaLink Investments, L.P. at BBB, Stable

DBRS Limited (DBRS) has today confirmed both the Issuer Rating and rating of the Senior Unsecured Bonds of AltaLink Investments, L.P. (AILP) at BBB with Stable trends. The rating confirmation is supported by the strong credit quality of its wholly owned operating subsidiary, AltaLink, L.P. (ALP or OpCo; rated “A”; see the AltaLink, L.P. rating report dated November 5, 2015).

AILP’s ratings are notched down from OpCo’s rating to reflect the following: (1) structural subordination of the debt at AILP relative to OpCo, (2) relatively high leverage at the AILP level, (3) reliance on a single operating subsidiary for cash distributions and (4) OpCo’s heavy capex requirements, which have limited available funds for distributions to AILP.

With the downshifting of Alberta’s economy and near completion of the “big build” associated with electric transmission infrastructure, OpCo’s capex is expected to further normalize over the next two years, while OpCo’s earnings and operating cash flow will benefit from a higher rate base. As a result, DBRS expects excess cash, which is not required to maintain the regulatory capital structure, will flow up to AILP. A positive rating action could be warranted should ALP’s higher cash distributions be used to pay down debt and improve financial flexibility.

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

The applicable methodologies are Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 2015) and Rating Holding Companies and Their Subsidiaries (January 2015), which can be found on the DBRS website under Methodologies.

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

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