ENMAX Corporation: Rating Report

DBRS Limited (DBRS) confirmed the Issuer Rating and Unsecured Debentures rating of ENMAX Corporation (ENMAX or the Company) at A (low) and the Commercial Paper rating at R-1 (low). All trends are Stable. The confirmations are based on (1) the stability of ENMAX’s regulated electricity distribution and transmission business (Power Delivery, 58% of 2017 DBRS-adjusted EBIT), which operates under a reasonable regulatory regime and provides steady and predictable earnings and cash flows for the Company; (2) key credit metrics that have remained in line with the current ratings, considering ENMAX’s mix of regulated and non-regulated businesses; and (3) continued financial support from its 100% owner, the City of Calgary (the City; rated AA (high)/R-1 (high) with Stable trends by DBRS), which provides the majority of the Company’s financing (68% of outstanding debt at December 31, 2017). These factors are partly offset by the continued pressure on ENMAX’s non-regulated business (Competitive Energy, 42% of 2017 DBRS-adjusted EBIT) mainly as a result of lower wholesale electricity margins amid ongoing price volatility in the Province of Alberta (the Province; rated AA/R-1 (high) with Negative trends by DBRS). The implementation of the Province’s recently introduced electricity market framework and policies, including the Alberta Climate Leadership Plan and a capacity pricing mechanism, is progressing. However, market uncertainty remains, especially with regards to whether there will be significant policy changes, or roll-back of some of these policies, when the current government’s mandate ends in 2019.