DBRS Morningstar Confirms Énergir Inc. at "A" and R-1 (low) With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed its Issuer Rating, First Mortgage Bonds (FMB) rating and Senior Secured Notes (the Notes) rating on Énergir Inc. (Énergir or the Company) at "A." DBRS Morningstar also confirmed the Commercial Paper (CP) rating at R-1 (low). All trends are Stable. The FMB, the Notes, and the secured credit facility backstopping the CP program are guaranteed by Énergir, L.P. (the Partnership). The Company is the general partner of the Partnership and serves as its financing entity. The ratings confirmation is based on the stability of Énergir, L.P.'s regulated businesses operating in the Province of Québec (Québec; rated AA (low) with a Stable trend by DBRS Morningstar).

Énergir, L.P.'s business risk assessment was unchanged in 2020. While the ongoing Coronavirus (COVID-19) pandemic negatively affected the Partnership's volumes and throughputs for the year, earnings remained relatively stable, benefitting from revenue decoupling mechanisms in place at Énergir-QDA, the regulated natural gas distributor operating in Québec, and Green Mountain Power Corporation (GMP), the regulated electricity distributor operating in Vermont. As such, DBRS Morningstar expects Énergir, L.P.'s earnings and cash flow to be steady and increase in line with the growing rate base.

The Partnership's key credit metrics weakened in F2020, with the debt-to-capital ratio spiking to 68.6% from 66.4% in F2019. This increase was partly because of continued capital expenditures (capex) at Standard Solar Inc. (Standard Solar), a nonregulated subsidiary focused on solar generation (capex of around $250 million in F2020). Standard Solar was spun-off from Énergir in October 2020, which led to a reduction of around $235 million of debt at Énergir, L.P. and reduced capex funding needs. As such, DBRS Morningstar expects the Partnership's key credit metrics to be stable over the medium term and remain in line with the "A" rating category. A positive rating action for Énergir is unlikely given the regulatory environments and the current key credit metrics of Énergir, L.P. A negative rating action could occur if the metrics weakened to a level no longer commensurate with the "A" rating category.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (October 27, 2020, https://www.dbrsmorningstar.com/research/368939), DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 14, 2021, https://www.dbrsmorningstar.com/research/372344), and DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 9, 2021, https://www.dbrsmorningstar.com/research/375001), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021, https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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