DBRS Confirms CSS (FSCC) Partnership at A (low), Stable
InfrastructureDBRS Limited (DBRS) has today confirmed the rating of A (low) with a Stable trend on the $190.3 million Senior Secured Bonds of CSS (FSCC) Partnership (ProjectCo). ProjectCo is the special-purpose entity created to design, build, finance and maintain a new approximately 665,000 square foot Forensics Services and Coroner’s Complex (the Project) under a 32.5-year public-private partnership with Ontario Infrastructure and Lands Corporation (OILC; formerly known as Infrastructure Ontario). The achievement of Substantial Completion on February 15, 2013, marked the commencement of the 30-year service phase, entailing routine maintenance of the facility and its electromechanical equipment as well as management of energy consumption and lifecycle maintenance to return the facility to OILC in a state of good repair upon expiry of the Project Agreement. Final completion was achieved on May 26, 2016, 39 months after achieving Substantial Completion. The prolonged final completion was caused by variations issued by OILC to accommodate two additional tenants, the Office of the Fire Marshal and Emergency Management of Ontario.
The Project has been performing well with no major operating concerns. ProjectCo indicates that Carillion Services (FSCC) Inc. (the Service Provider) has been operating the facility in line with expectations. Availability payments have been steady with only nominal deductions. During 2016 (until November 2016), the service deductions totalled $11,112, the majority of which were caused by elevator unavailability failures during the months of August and November. ProjectCo has indicated that these are not major and were part of normal operations. The failure points, totalling 86 for the last 12 months ended November 2016, were significantly below the threshold for warning or monitoring notices. DBRS does not expect any significant changes in facility operations for the upcoming year and believes that operations will continue in a good state, also noting the downward trend in the number of failures.
The net energy pain-share adjustments for the second and third year amounted to $135,009. According to ProjectCo, this was attributable to higher operating load outcomes than originally assumed when the targets were set early in the design stage. ProjectCo has indicated that OILC is revisiting the targets, which could potentially reduce the pain-share adjustments going forward.
ProjectCo indicated that the Service Provider and OILC maintain a good working relationship and continue to meet on a monthly basis to discuss operational issues. Project resiliencies remain at levels that are supportive of the rating with operating and maintenance and lifecycle break-even points at 46.7% and 45.2%, respectively. Furthermore, minimum/equity lock-up debt service coverage ratio projections of 1.25 times (x) and 1.15x, respectively, are maintained. A six-month debt service reserve and the performance security provided by the Service Provider will afford a modest cushion against unforeseen events during the service phase.
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 Public-Private Partnerships (March 2016), 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.
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.
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