DBRS Morningstar Confirms Credit Ratings on DIM Wind, Limited Partnership & Co-Owners at “A,” Stable Trends

DBRS Limited (DBRS Morningstar) confirmed DIM Wind, Limited Partnership & Co-Owners’ Issuer Rating and Senior Loan credit rating at “A.” Both trends are Stable. The credit rating confirmations reflect the 350 megawatt Rivière-du-Moulin wind power-generating facility’s (the Project) continued strong operating and financial performance, with a senior debt service coverage ratio (DSCR) of 3.55 times (x) in 2022 and 2.86x for the last 12 months ended September 30, 2023.

The Senior Loan financed the development and operations of the Project, located approximately 130 kilometres north of Québec City. The Project sells all electricity generated to the offtaker, Hydro-Québec (rated AA (low) with a Stable trend by DBRS Morningstar), under a 20-year power purchase agreement (PPA) that expires in November 2034, at which time the Senior Loan will be fully amortized.

The credit ratings are anchored by (1) the strength of the long-term inflation-adjusted fixed-price PPA with a highly rated offtaker, (2) the proven wind turbine technology and appropriate operating and maintenance (O&M) arrangements with experienced wind turbine O&M providers, (3) the exceptionally strong minimum senior DSCR of 2.86x at P90 production levels (the DBRS Morningstar base case) for the term of the Senior Loan, (4) the reliable operating and financial results matching or exceeding the DBRS Morningstar base-case projections, and (5) the credit strength and technical expertise of the Project’s major co-owners. The main challenges include (1) long-term O&M risk, because the facility operates in relatively complicated terrain, and (2) energy production volatility caused by extreme weather events. The credit ratings are also constrained, to a degree, by some substandard structural features embedded in the loan covenant package.

DBRS Morningstar does not view a positive credit rating action as likely because the credit rating is constrained by the loan’s structural features. DBRS Morningstar may consider a negative credit rating action if the DSCR decreases to less than 1.80x on a sustained basis.

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 (July 4, 2023) at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Wind Power Projects (September 12, 2023), https://www.dbrsmorningstar.com/research/420440/global-methodology-for-rating-wind-power-projects

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 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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