DBRS Confirms Trillium Windpower, LP at BBB, Stable Trend

DBRS Limited (DBRS) 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, which is in turn 65.2% owned by NextEra Energy, Inc. (NextEra).

The Projects benefit from attractive long-term fixed power prices under Feed-in Tariff contracts with the Independent Electricity System Operator (IESO; rated A (high) with a Stable trend by DBRS) with 20-year terms. DBRS has detailed operational and financial data covering the period from 2014 until the end of September 2017. Operational performance has been strong with average wind turbine technical availability slightly higher than 99%. There have been no reported major component failures.

Availability for 2016 and the last twelve months (LTM) ended September 2017 was above 99%; however, actual production levels for the same periods were well below the rating case due to significant economic curtailment. The Projects are compensated for most of this curtailment by the IESO, which forecasts the foregone energy that would have been generated free of curtailment based on the wind resource and other assumptions. Incorporating curtailment, DBRS estimates that production would have performed at approximately 102% of the P50 rating case for 2016 and 104% for LTM September 2017. Operating expenses for 2016 and LTM 2017 slightly exceed the rating case projections, but are not substantial, representing approximately 15% of operating revenues. The strong generation (inclusive of the IESO compensated foregone production) resulted in Project revenue exceeding the P90 rating case and approaching the P50 rating case revenue level, yielding debt-service coverage ratios (DSCRs) of 1.58 times (x) and 1.62x for 2016 and LTM 2017 respectively, well above the minimum rating case DSCR of 1.46x. The Project remains exposed to negative Hourly Ontario Energy Price (HOEP) pricing, which is minimal, reducing revenues by approximately only $38,000 for 2016 and a similar figure for the first nine months of 2017.

DBRS may revise the Project’s rating case if the project continues to perform at or above the P50 level going forward (including any curtailed production) with better than expected DSCRs. The rating is constrained by (1) the inherent uncertainty with wind forecasts, (2) operations and maintenance cost management and (3) exposure to negative HOEP prices. These risks are partially mitigated due to the Project’s actual performance and ability to maintain cost discipline and minimal exposure to negative HOEP prices.

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

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

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 under Related Documents or by contacting us at info@dbrs.com.

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

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.