DBRS Morningstar Confirms NorthwestConnect General Partnership at BBB (high), Stable Trend

DBRS Limited (DBRS Morningstar) confirmed NorthwestConnect General Partnership’s (ProjectCo) Issuer Rating as well as the rating on the Senior Amortizing Bonds – Series 1 at BBB (high) with Stable trends. ProjectCo is the special-purpose entity created to design, build, finance, operate, and maintain Northwest Anthony Henday Drive (the Project) under a 33.25-year agreement with the Province of Alberta (rated AA (low) with a Positive trend by DBRS Morningstar).

The Project is in its 11th year of operations, having achieved Traffic Availability on November 1, 2011, with all remaining deficiencies completed by October 2016. The road has generally performed well with no material deductions or interruptions to Traffic Availability. The Project has incurred relatively minor deductions of roughly $20,000 related to lane closures and a delay in the achievement of bare pavement following the end of a storm in the period since the last rating report in October 2021.

Bridge inspections were conducted in February 2021 and, as of this review, all repair works identified have been completed, ahead of the required contract requirements of the next inspection in October 2022. ProjectCo does not expect any material deficiencies outside of planned regular maintenance, nor any costs requiring additional expenditure. Bridge sealing was completed in 2020, and the next sealing is scheduled for 2024 on a four-year cycle. Pavement inspection is required on a three-year interval, and the next one is scheduled for June 2023.

The minimum Operations and Maintenance and lifecycle resiliencies are 19% and 17%, respectively (at 1.05 times (x) breakeven debt service coverage ratio (DSCR)), which are supportive of the overall ratings. For the 12 months ended April 30, 2022, the DSCR was 1.25x, higher than the minimum of 1.15x expected in the financial model. DBRS Morningstar notes the metrics are at the low end of the current ratings, and continued erosion of credit metrics could result in negative ratings pressure. DBRS Morningstar does not believe a positive rating action is likely over the near term.

There were no Environmental/Social/Governance factors 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 (May 17, 2022).

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

The principal methodology is Global Methodology for Rating Public-Private Partnerships (August 30, 2022; https://www.dbrsmorningstar.com/research/402155), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting 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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