DBRS Morningstar Confirms AltaLink, L.P.’s Issuer Rating at “A,” Stable Trend

DBRS Limited (DBRS Morningstar) confirmed AltaLink, L.P.’s (ALP) Issuer Rating and Senior Secured Notes rating at "A" and its Commercial Paper rating at R-1 (low). All trends are Stable. The ratings reflect ALP’s low-risk regulated transmission business in Alberta and the financial metrics achieved over 2022 and the first quarter of 2023, which are in line with the rating level.

ALP's business risk assessment remains unchanged since the last rating confirmations and continues to be supported by a reasonable regulatory framework under the Alberta Utilities Commission (AUC). Two significant regulatory matters are still pending. Firstly, the AUC is in the process of evaluating the implementation of a formula-based approach in the approved return on equity for 2024, with a decision expected in the third quarter of 2023. Secondly, the status of the Utility Asset Disposition (UAD) issue remains uncertain following the court's dismissal of the AUC's recent UAD policy implementation for further consideration and redetermination. This decision has the potential to allow utilities to recover stranded costs from ratepayers on a case-by-case basis. DBRS Morningstar will monitor the progress of these proceedings but does not expect any adverse regulatory decision in 2023 that would have a material negative impact on ALP's credit profile.

ALP's financial risk assessment remains supportive of the "A" ratings, reflected by stable cash flow and a reasonable debt-to-capital ratio (57.1% as at the last 12 months ended March 31, 2023). DBRS Morningstar does not expect costs related to the 2023 Alberta wildfires to have a material impact as repair costs are expected to be recovered through ALP’s ratepayer-funded self-insurance reserve. DBRS Morningstar does not expect to take any positive rating action on ALP in the medium term, primarily reflecting the stability of the current business risk assessment. However, should ALP's key credit metrics weaken materially and sustainably to below the levels required for the "A" rating category, DBRS Morningstar could take a negative rating action.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
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/416784 (July 4, 2023).

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

DBRS Morningstar applied the following principal methodologies:
-- Global Methodology for Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (September 13, 2022; https://www.dbrsmorningstar.com/research/402616)
-- DBRS Morningstar Global Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (February 24, 2023; https://www.dbrsmorningstar.com/research/410196)

The credit rating methodologies used in the analysis of this transaction can be found at:
https://www.dbrsmorningstar.com/about/methodologies.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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.

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

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