DBRS Confirms Comber Wind Financial Corporation at BBB, Stable Trend

DBRS Limited (DBRS) has today confirmed the rating of Comber Wind Financial Corporation’s (the Issuer) $450 million Series 1 Senior Secured Bonds (the Bonds) due November 15, 2030, at BBB with a Stable trend. The Issuer is the financing vehicle of 2016 Comber Wind Limited Partnership (ProjectCo), a special-purpose entity that owns the 82.8-megawatt (MW) Comber East project and the adjacent 82.8 MW Comber West wind project (together, the Project) located in Essex County, Ontario. As at December 31, 2016, approximately $381.9 million of Bonds were outstanding.

On October 20, 2016, DBRS confirmed the rating of the Bonds following an internal reorganization transaction. The reorganization entailed a sale of assets from existing project entities to new affiliate entities created as part of the reorganization process. The internal reorganization did not trigger a change of control as defined in the Trust Indenture. The new structure and collateral package are materially identical to the pre-reorganization structure. All material contracts were dealt with through assignment and assumption agreements, some of which required consent that was obtained from the relevant parties. (Please refer to the DBRS press release of October 20, 2016, for more information).

The Project commenced commercial operations in November 2011, generating an average of 476.3 gigawatt hours (GWh) annually, 8.5% above the annual P90 production forecast of 438 GWh and 9.7% above the rating case forecast of 434 GWh. The Issuer’s P50 planned generation is 500.7 GWh, which was not achieved because of lower wind speeds compared to plan. The debt service coverage ratio (DSCR) of ProjectCo has been above the projected average and minimum DSCRs of 1.38 times (x) and 1.40x, respectively: 1.54x for 2016, 1.53x for 2015, 1.63x for 2014 and 1.68x for 2013. The rating case forecast assumes modest curtailment, with net production at 434 GWh until 2027 (when the curtailment cap is reached). A modest cost for negative Hourly Ontario Energy Price is also assumed in the rating case. If wholesale electricity prices are negative, ProjectCo is not protected, which would reduce the effective price received.

ProjectCo benefits from fully contracted power prices at attractive rates under two Feed-In-Tariff contracts (for Comber East and Comber West) with the Independent Electricity System Operator (IESO; rated A (high) with a Stable trend by DBRS). The contract expires 12 months after the maturity of the Bonds. For 20 years until November 2031, the IESO pays to ProjectCo the difference between a fixed but partially indexed price, currently $142 per megawatt hour (MWh) and the market price received in Ontario. The realized 2016 price for energy was $3.78/MWh higher than plan.

Total operating and maintenance (O&M) costs in 2016 (which include regular O&M, insurance, salaries & benefits, system control and major maintenance) amounted to $3.2 million versus the planned $4.5 million. Regular O&M was under plan by $0.6 million as a result of savings realized in the purchase of filters, grease/oil and spare parts. Major maintenance was lower than budget by $0.4 million because of less non-structural blade maintenance being required. A Major Maintenance Reserve Account contains 50% of the projected major maintenance expenditure for a given year. The amount of reserve is adjusted at the beginning of each year for that year’s expected maintenance cost. DBRS will continue to monitor regular O&M and major maintenance spending.

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 principal methodology is Rating Wind Power Projects, which can be found on dbrs.com under Methodologies.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.