DBRS Morningstar Confirms Plenary Health Hamilton LP Ratings at “A” with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Long-Term Senior Bonds (the Long-Term Bonds) rating of Plenary Health Hamilton LP (ProjectCo) at “A” with Stable trends. ProjectCo is the special-purpose entity created to design, build, finance, and maintain a 305-bed mental health facility (the Project) under a 33-year public- private partnership with St. Joseph’s Healthcare Hamilton (the Hospital).

The Project successfully achieved substantial completion on the target date of December 6, 2013, and achieved final completion on December 22, 2017. The Project is now in its tenth year of the 30-year service phase, during which Honeywell Limited (Honeywell or the Service Provider) performs all facilities management (FM) services as well as lifecycle services on behalf of ProjectCo in order to return the facility to a state of good repair upon expiry of the Project Agreement. The facility operations continue to be stable, with failure points and deductions being well below the threshold limits. For the last 12 months (LTM) from November 2021 to October 2022, the overall reported deductions were $9,500, or 0.03% of the approximately $30 million in revenue reported in the same period.

For the year ended March 31, 2022, the overall actual energy consumption was in line with target consumption levels, with electricity and natural gas consumption being 19% lower and 19% higher than the discrete target levels, respectively. This led to an annual gainshare adjustment of $127,600 related to electricity consumption and an annual painshare adjustment of $77,910 related to gas consumption, aggregating to a net gainshare adjustment of $49,690, which is fully passed down to Honeywell. While natural gas consumption continued to be higher than target this year, it was slightly improved compared with last year. A six-month debt service reserve and the performance security provided by the Service Provider, which includes a letter of credit in an amount equal to one-half of the annual FM costs plus average lifecycle (indexed) costs, afford a modest cushion against unforeseen events during the service phase.

As of the last compliance certificate for the LTM ended November 30, 2022, the debt service coverage ratio (DSCR) was 1.22 times (x), which is in line with the projected DSCR. Material deductions on account of performance-related failures during the service phase could lead to a negative rating action. The potential for a positive rating action remains limited at the current ratings, given the Project’s resiliency levels.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and 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/dbrs-morningstar-criteria-approach-to-environmental- social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodology applicable to the rating 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].

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at [email protected].

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