DBRS Places Clover Limited Partnership Under Review with Negative Implications

DBRS Limited (DBRS) placed the Issuer Rating and the rating of the Series A Senior Notes and Series B Senior Notes issued by Clover Limited Partnership (the Issuer), each currently rated BBB, Under Review with Negative Implications. The rating actions are due to the announcement by Pacific Gas and Electric Company (PG&E or the Company) that it plans to initiate voluntary reorganization proceedings under Chapter 11 and that PG&E is one of the six power purchase agreement (PPA)/swap counterparties for the portfolio of operating wind and solar power-generating assets partially owned by the Issuer. The PG&E PPA is a 20-year, fixed-price agreement (expiry in May 2034) for the delivery of renewable energy credits (RECs) for the Blackspring Ridge wind facility located in Alberta.

There continues to be considerable uncertainty with respect to the impact of PG&E’s potential Chapter 11 filing on the PG&E PPA; however, the Chapter 11 process substantially increases the risk that the PG&E PPA could be renegotiated or disclaimed. Despite higher risk of loss of revenues under the PG&E PPA, DBRS notes that the financial impact on the overall portfolio cash flows is relatively limited, as payments under the PG&E PPA only account for approximately 7% of the Issuer portfolio’s EBITDA (on an annual basis). In addition, the RECs are a viable, tradeable commodity, and the Issuer would likely have options with respect to the sale of the RECs in an event of termination or reduction in revenues under the current PG&E PPA. DBRS will continue to closely monitor events surrounding PG&E and any potential adverse impact on portfolio cash flows. If in due course it is determined that there is a permanent reduction in portfolio cash flows that materially reduces the overall debt service coverage ratio, a negative rating action may occur. Conversely, if the PG&E PPA is retained pursuant to the Chapter 11 reorganization, or the Issuer can find replacement REC PPAs with no material impact on the portfolio cash flows, the rating may be maintained at the current level, and the Under Review – Negative status could be removed. The timing of removing the rating from Under Review – Negative will largely depend on the outcome of PG&E’s reorganization process.

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The principal methodologies are Rating Solar Power Projects, Rating Wind Power Projects and DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries, which can be found on dbrs.com under Methodologies & Criteria.

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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