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

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and the First Mortgage Bonds (the FMB) rating of Énergir, L.P. (the Partnership) at "A." DBRS Morningstar also confirmed the Issuer Rating, the FMBs and Senior Secured Notes (the Notes) ratings on Énergir Inc. (Énergir) at "A" and the Commercial Paper (CP) rating at R-1 (low). All trends are Stable. The Partnership is 71% owned by Énergir, which serves as the general partner and was the financing entity for Énergir, L.P. Debt at Énergir (the FMBs, the Notes, and a credit facility which backstops the CP program) is guaranteed by the Partnership and ranks pari passu with the FMBs at the Partnership. The ratings of Énergir, L.P. are based on the stability of its regulated businesses operating in the Province of Québec (Québec; rated AA (low) with a Stable trend by DBRS Morningstar) and the State of Vermont.

Since the most recent review, there have been no material changes to Énergir or the Partnership's operations. Énergir, L.P.'s business risk assessment continues to be supported by its stable regulated operations in Québec and Vermont. The Partnership's key credit metrics have also improved as expected since the last review as it had spun-off in October 2020 Standard Solar Inc., a nonregulated subsidiary focused on solar generation, which immediately led to a reduction of around $235 million of debt and reduced capital expenditures needs. DBRS Morningstar additionally notes the Trust Deed governing Énergir, L.P. includes a covenant where nonregulated energy activities and nonregulated activities cannot, respectively, exceed 10% and 5% of total assets (which, as at September 30, 2021, were at 2.12% and none, respectively). As such, barring an acquisition, DBRS Morningstar expects the Partnership's business and financial risk assessments to be very stable. A positive rating action is unlikely given the regulatory environments and the current key credit metrics of Énergir, L.P. DBRS Morningstar could consider a negative rating action 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 (September 24, 2021; https://www.dbrsmorningstar.com/research/384922); DBRS Morningstar Criteria: Guarantees and Other Forms of Support (April 4, 2022, https://www.dbrsmorningstar.com/research/394683); and DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 1, 2022, https://www.dbrsmorningstar.com/research/393065), 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).

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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