DBRS Morningstar Maintains Under Review with Negative Implications Status of Clover Limited Partnership

DBRS Limited (DBRS Morningstar) maintained the Under Review with Negative Implications status on the Issuer Rating and Series A Senior Notes and Series B Senior Notes ratings of Clover Limited Partnership (the Issuer), each currently rated BBB. On January 16, 2019, the ratings were placed on Under Review with Negative Implications following the announcement by Pacific Gas and Electric Company (PG&E), which is one of six power purchase agreement (PPA)/swap counterparties for the portfolio of operating wind and solar assets partially owned by the Issuer and accounts for approximately 7% of the Issuer’s portfolio EBITDA (on an annual basis), of its plan to initiate voluntary reorganization proceedings under Chapter 11 (see the press release dated January 16, 2019, for additional details). PG&E subsequently filed for Chapter 11 reorganization on January 29, 2019. The maintenance of the Under Review with Negative Implications status for the ratings reflects PG&E’s continuing reorganization process. The Issuer, an indirect and wholly owned subsidiary of Canada Pension Plan Investment Board (the Sponsor; rated AAA with a Stable trend by DBRS Morningstar) through wholly owned subsidiaries CPP Investment Board Real Estate Holdings Inc. (99.9% ownership interest) and Cordelio Clover Inc. (the General Partner; 0.1% ownership interest), is a special-purpose vehicle created to own a 49% interest in Enbridge Canadian Renewable LP (the Joint Venture (JV)), with the remaining 51% owned by Enbridge Pipelines Inc. (rated “A” with a Stable trend by DBRS Morningstar) and Enbridge Income Partners Holdings Inc. The JV owns an approximately 74% interest (1,035 megawatts (MW)) in a 1,403 MW portfolio (the Portfolio) of 11 operating wind-power-generating facilities (with a total capacity of 1,303 MW) and three operating solar-power-generating facilities (collectively, the Facilities; total capacity of 100 MW) located across Canada. The Issuer’s interest amounts to 507.4 MW, approximately 36% of the Portfolio.

DBRS Morningstar notes that in its recent court filings, PG&E has expressed its intent to continue to honour its existing power contracts/agreements; however, uncertainty remains, as the reorganization process continues and is subject to bankruptcy court approval. The Issuer continues to be paid under the PG&E renewable energy credit (REC) PPA. DBRS Morningstar further notes that the recent passage of Assembly Bill 1054 in California and the creation of the wildfire insurance fund are considered to be credit positive; nonetheless, PG&E’s participation is subject to the approval of its reorganization plan by June 30, 2020. DBRS Morningstar will continue to closely monitor the bankruptcy proceedings and any potential impact on the Portfolio’s cash flows. If in due course it is determined that there is a permanent reduction in the Portfolio’s cash flows that materially reduces the overall debt service coverage ratio (DSCR), a negative rating action may occur. Conversely, if the PG&E PPA is retained pursuant to the Chapter 11 reorganization, or if the Issuer can find replacement REC PPAs with no material impact on the Portfolio’s cash flows, the ratings may be maintained at the current level and the Under Review with Negative Implications status could be removed. The timing of removing the ratings from the Under Review with Negative Implications status will largely depend on the outcome of PG&E’s reorganization process. The reorganization process is currently expected to be completed by June 30, 2020.

The Facilities continue to perform reasonably well. Portfolio generation over the last 12 months ending August 2019 slightly exceeded forecast P50 generation levels, and average availability was high at 97.6%. The project appears to be on track to exceed or meet its rating-case DSCR of 1.34x for 2019.

Notes:
The principal methodologies are Rating Wind Power Projects, Rating Solar 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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

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