DBRS Morningstar Confirms North Battleford Power L.P. at A (low) with a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed North Battleford Power L.P.’s (ProjectCo or the Issuer) Issuer Rating and Series A Senior Secured Amortizing Bonds (the Bonds) rating at A (low) with Stable trends. Northland Power Inc. wholly owns ProjectCo, a limited partnership and special-purpose vehicle that owns and operates a 260-megawatt (nameplate capacity) combined-cycle baseload power generation facility that has been in operation since June 5, 2013. The facility benefits from a 20-year baseload power purchase agreement (PPA) with Saskatchewan Power Corporation (SaskPower) that expires in June 2033. DBRS Morningstar notes that SaskPower's current credit profile does not constrain the ratings. The project is located approximately 150 kilometres northwest of Saskatoon on land owned by the Issuer.

On June 30, 2020, ProjectCo issued incremental pari passu bonds of $44.0 million, permissible under the Trust Indenture, in addition to the existing bonds of $667.3 million issued in 2013 (please see DBRS Morningstar’s press release dated July 2, 2020). The Bonds are fully amortizing and mature on December 31, 2032, approximately six months prior to the PPA expiration date. As a result of the debt upsizing, DBRS Morningstar expects the minimum debt service coverage ratio (DSCR) to be 1.51 times (x). Other than the one-year DSCR drop in 2029 to 1.51x, DBRS Morningstar projects the DSCR range will be between 1.69x and 1.95x (average 1.74x) from January 2021 to December 2032, which remains supportive of the A (low) rating.

The project continues to perform well, and ProjectCo’s operating results for 2020 and the last 12 months ended June 30, 2021 (LTM 2021) were healthy. The DSCR of 1.93x and 1.68x for 2020 and the LTM 2021, respectively, met expectations for the period. Overall plant availability of around 98.0% in 2020 surpassed projections.

If the project experiences sustained deterioration in its performance and/or increased operations and maintenance expenses with significant impact on the DSCR, DBRS Morningstar may consider a negative rating action.

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 methodology is Rating Project Finance (August 18, 2021; https://www.dbrsmorningstar.com/research/383185), 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.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at [email protected].

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

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