Press Release

DBRS Morningstar Comments on Waterloo North Hydro Inc. Merger Receiving Approval from Shareholders

Utilities & Independent Power
December 20, 2021

DBRS Limited (DBRS Morningstar) notes that all shareholders of Waterloo North Hydro Inc. (WNH; rated A (low) with a Stable trend by DBRS Morningstar) and Kitchener-Wilmot Hydro Inc. (KWH) have approved the proposed merger of the two utilities (the Merger). WNH and KWH will submit a Mergers, Acquisitions, Amalgamations, and Divestitures application with the Ontario Energy Board (OEB) with a target closing in 2022.

DBRS Morningstar expects the Merger to have a modestly positive impact on WNH as (1) both WNH and KWH are electricity distributors regulated by the OEB, (2) the combined entity will be significantly larger with over 157,000 customers compared with WNH’s existing 58,000 customers, (3) leverage of KWH is below the OEB regulatory capital structure of 60% debt and 40% equity, and its earnings have been aligned with the regulatory return on capital. DBRS Morningstar expects that following the merger leverage at the combined entity will be at or below the OEB’s 60% debt and 40% equity regulatory structure. DBRS Morningstar notes that the transaction should result in meaningful synergies, which, under the current regulatory regime, would be to the benefit of shareholders for up to ten years. DBRS Morningstar notes that the potential synergies are partly offset by integration risk, which could result in synergies being less than projected.

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

All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (September, 24, 2021;, which can be found on 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;

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