DBRS Confirms Comber Wind Financial Corporation at BBB, Stable Trend

DBRS Limited (DBRS) confirmed its rating of BBB with a Stable trend on the $450 million Series 1 Senior Secured Bonds (the Bonds), due November 15, 2030, of Comber Wind Financial Corporation (the Issuer). 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, 2017, approximately $363.8 million of Bonds were outstanding.

The Project commenced commercial operation in November 2011, generating an average of 476.2 gigawatt hours (GWh) annually as at year-end 2017, which is 8.6% above the annual P90 production forecast of 438.4 GWh and 9.7% above the rating-case forecast of 434.3 GWh. The P50 planned generation is 500.7 GWh, per the independent engineer’s (AWS Truepower) wind assessment. The P50 has not been achieved due to lower wind speeds compared with plan, although generation was quite close to the P50 in 2013 and 2014. The Project had a strong start to 2018, with Q1 generation of 165 GWh, 11.5% above the P50 planned generation of 148 GWh. Revenue for the Project mirrors the generation.

The debt service coverage ratio (DSCR) of ProjectCo has been above the rating-case projected average and minimum DSCRs of 1.38 times (x) and 1.40x, respectively: 1.63x for 2017, 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 Prices 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, which was $143 per MW hour (MWh) for 2017 ($143.2/MWh for 2018), and the market price received in Ontario. The realized 2017 price for energy was $0.42/MWh lower than plan ($142.37/MWh versus $142.79/MWh).

Total operating and maintenance (O&M) costs in 2017 (which include regular O&M, insurance, salaries and benefits, system control and major maintenance) amounted to $3.0 million versus the plan of $5.1 million. Regular O&M was under plan by $0.8 million due to lower usage of maintenance material as well as lower generation. Major maintenance was lower than budget by $0.9 million due to a deferral of major maintenance projects. 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 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.

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