DBRS Confirms Trillium Windpower, LP Series 1 Senior Secured Amortizing Notes at BBB, Stable

DBRS Limited (DBRS) has today confirmed the rating of BBB with a Stable trend on the Series 1 Senior Secured Amortizing Notes (the Notes) of Trillium Windpower, LP (the Issuer), the special-purpose entity created to finance and indirectly own the 22.9 megawatt (MW) Conestogo and 124.4 MW Summerhaven wind farms located in Wellington and Haldimand Counties in Ontario (together, the Project). The Issuer is indirectly and wholly owned by NextEra Energy Operating Partners, LP, in turn 65.2% owned by NextEra Energy, Inc. (NextEra).

DBRS has detailed operational and financial data covering the period from the month after the Notes’ issuance until the end of September 2016. Operational performance has been good with average wind turbine technical availability slightly higher than 99%. There have been no reported major component failures.

In July 2016, DBRS reviewed information received from NextEra, the Project sponsor, in connection with the release of the Wind Data Reserve Account (WDRA). As per the trust indenture, the WDRA may be released after DBRS determines that there would be no adverse effect on the rating based on certain information received from the Issuer (see August 3, 2016, DBRS commentary, “DBRS Comments on Trillium Windpower, LP’s New Wind Resource and Energy Production Reports and the Wind Data Reserve Account”). The information delivered to DBRS by the sponsor on the Issuer’s behalf included: (1) operational Energy Production Reports based on an updated resource assessment using two years of actual operational data, (2) an updated financial model incorporating the revised energy production estimate and (3) a memo from the Independent Engineer (IE) outlining its review of the model and new forecast. DBRS also received an Officer’s Certificate confirming that the minimum and average projected debt service coverage ratio (DSCR) resulting from the new energy production forecast were 1.46 times (x) and 1.47x, respectively. The WDRA was released by the Issuer on this basis.

The new wind resource studies updated the wind energy production estimate on which the financial model debt sizing is based. The one-year P90 generation increased to 335.8 gigawatt hours (GWh) from 329.6 GWh (prior to any non-compensated curtailment assumptions; post curtailment, the model shows a new P90 of 333.0 GWh). The IE notes that the increase in P90 production is driven by a reduction in energy production assessment uncertainty from the Project’s results over nearly three years of operations. At the same time, the new studies have decreased the one-year P50 generation to 365.5 megawatt hours (MWh) from 395.9 MWh after further consideration of historical performance.

The Issuer has continued to perform well with respect to the updated forecast, achieving production for 2015 that slightly exceeded the original P75 generation level and meeting the new P50 level. Net revenue for 2015 at over 50 million exceeded the P90 estimate by approximately 12%. The resulting DSCR for 2015 exceeded 1.50x.* For 2016, based on nine months of actual results, DBRS estimates annual generation at 301 GWh, approximately 10% below the new P90 level, largely as a result of significant Independent Electricity System Operator (IESO)-directed curtailment on the Summerhaven wind farm, especially in Q1 2016. Under the Feed-in Tariff contract, however, the IESO compensates the Project for this curtailment by forecasting what would have been generated based on the wind resource and other assumptions. For the first nine months of 2016, IESO-directed compensated curtailment amounted to approximately 65 GWh. As a result of curtailment compensation from the IESO, DBRS estimates revenue for 2016 to reach $52.8 million, exceeding the new P90 forecast by nearly 10% and resulting in a projected DSCR of 1.60x.

*DBRS’s DSCR calculation is based on the Issuer’s financial statements. Principal and interest payments are calculated on an accrual basis for the calendar year January 1 to December 31.

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 Wind Power Projects, which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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