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 amortizing Project Bonds due May 31, 2026, at A (high) with Stable trends. BPC is a tax-exempt single-purpose entity that owns and operates a 145 megawatt hydroelectric generation facility and the Brilliant Terminal Station transmission assets (the Project) in the Columbia-Kootenay region of British Columbia.

The ratings reflect: (1) the contractual transfer of hydrology risk to British Columbia Hydro and Power Authority (BC Hydro; rated AA (high), Stable, by DBRS) as per the Canal Plant Agreement to 2035; (2) highly predictable cash flows resulting from a primary power purchase agreement (PPA) to 2056 with FortisBC Inc. (FortisBC; rated A (low), Stable, by DBRS) that further mitigates operating and capital expenditure risks; and (3) additional support from a backstop power purchase agreement with Powerex Corporation (Powerex), a wholly owned subsidiary of BC Hydro. Rating of power generation project debt is usually constrained by the offtaker’s rating; however, BPC benefits from implicit support from BC Hydro, given its 100% ownership in Powerex and the interlocking board structures. Furthermore, given the Project’s superior market-based low-cost structure and its strategic importance as a reliable long-term energy supplier to Fortis BC, DBRS expects that the primary PPA would likely survive in a certain form should FortisBC default.

BPC’s financial performance has been stable year over year. Debt service coverage ratios (DSCRs) for F2015 (ending March 31, 2015) and the first nine months of F2016 (ending December 31, 2015), were robust at 1.72 times (x) and 1.75x, respectively. The DSCR, consistent with the current ratings, is expected to increase further over the next few years, benefitting from a tariff escalator under the PPA.

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, which can be found on our website under Methodologies.

This rating is endorsed by DBRS 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.