DBRS Morningstar Confirms North Battleford Power L.P. at A (low) With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed North Battleford Power L.P.’s (the Issuer or ProjectCo) Issuer Rating and Series A Senior Secured Amortizing Bonds (the Bonds) credit rating at A (low) with Stable trends. Northland Power Inc. wholly owns ProjectCo, a limited partnership and special-purpose vehicle that owns and operates a 260-megawatt (nameplate capacity) combined-cycle baseload power generation facility that has been in operation since June 5, 2013. The facility benefits from a 20-year baseload power purchase agreement (PPA) with Saskatchewan Power Corporation (SaskPower) that expires in June 2033. DBRS Morningstar notes that SaskPower's current credit profile does not constrain the credit ratings. The project is approximately 150 kilometres northwest of Saskatoon on land owned by the Issuer. The credit rating confirmations reflect DBRS Morningstar's view that the project will continue to perform as expected.

The project's debt service coverage ratio (DSCR) of 1.80 times (x) for 2022 exceeded projections. The overall plant availability of around 97.8% in 2022 also remained high. DBRS Morningstar notes that the project has been consistently performing well and is likely to meet DSCR projections for 2023.

The credit ratings remain supported by (1) a highly supportive capacity-based long-term PPA with a high-quality counterparty, (2) mature and proven technology, (3) structural enhancements, and (4) a strong project sponsor and experienced operator. The key challenges include (1) performance risk and (2) single point of failure risk.

If the project experiences sustained deterioration in its performance and/or increased operating and maintenance expenses with a significant impact on the DSCR, DBRS Morningstar may consider a negative credit rating action. An upgrade is possible if the project's performance materially exceeds projections on a consistent basis.

ENVIRONMENTAL, SOCIAL, AND 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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (July 4, 2023).

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

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Project Finance (September 12, 2023; https://www.dbrsmorningstar.com/research/420425/global-methodology-for-rating-project-finance

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.

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 credit 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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