DBRS Morningstar Confirms Clover Limited Partnership at BBB With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and the ratings of the Series A Senior Notes and Series B Senior Notes (collectively, the Notes) issued by Clover Limited Partnership (the Issuer) at BBB with Stable trends. 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), 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 approximate 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 (with a total capacity of 100 MW) across Canada. The Issuer’s interest in the Portfolio (the Issuer's Portfolio) amounts to approximately 36%. The confirmation of the ratings is based on the healthy operating and financial performance of the Issuer's Portfolio compared with the rating case. The Stable trends reflect DBRS Morningstar’s expectation that the Issuer's Portfolio will continue to perform at par or better than the rating case projections.

DBRS Morningstar notes that the Coronavirus Disease (COVID-19) pandemic has had no material impact on the financial and operational performance of the Issuer's Portfolio because (1) electricity generation is an essential service and the Portfolio was not affected by any government-mandated shutdown and (2) substantially all electricity generated from the Issuer's Portfolio is insulated from electricity price risk as it is under fixed-price contracts with strong counterparties.

In 2021, the Portfolio’s (and, correspondingly, the Issuer’s Portfolio) overall generation was approximately 0.6% above P50 levels. Also, average availability in 2021 was healthy at around 96.7%, and the project’s debt service coverage ratio (DSCR) was approximately 1.61 times (x), exceeding its rating case (based on P90 generation level) DSCR of 1.34x. DBRS Morningstar notes that the 2021 DSCR of approximately 1.61x excludes capital expenditure (capex) because these come from the Sponsor’s contributions. Including this capex in the DBRS Morningstar DSCR calculations would result in a DSCR of approximately 1.55x. The project appears to be on track to meet or exceed its rating-case DSCR of 1.34x for 2022. DBRS Morningstar has been informed that the Issuer is in the process of negotiating new operations and maintenance (O&M) contracts with various service providers. DBRS Morningstar will monitor impact of these new O&M contracts on DSCR levels, if any.

DBRS Morningstar may take a positive rating action in the medium term if the Issuer's Portfolio continues to perform materially better than the rating case, including generation above P50 levels, on a consistent basis. DBRS Morningstar may consider an adverse rating action if the Issuer's Portfolio experiences a sustained underperformance compared with the rating case—for example, an increase in capex and operating and maintenance expenses, reduced availability with material impacts on the DSCR, and/or deterioration in the credit profile of the power-purchase agreements/swap counterparties.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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 (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).

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.

The conditions that lead to the assignment of a Negative or Positive trend are generally 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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