DBRS Morningstar Confirms Credit Ratings on TriSummit Utilities Inc. at BBB (high) With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed TriSummit Utilities Inc.’s (TSU or the Company) Issuer Rating and Unsecured Medium-Term Notes credit rating at BBB (high) with Stable trends. The credit rating confirmations reflect TSU’s stable business risk profile underpinned by its ownership of regulated distribution utilities, diversified asset base, and contracted renewable power generation assets. Key challenges include the Company’s relatively small size, operational risks at its regulated utilities, and the impact of weather on natural gas consumption and electricity generation.

DBRS Morningstar notes that in March 2023, TSU completed its acquisition of ENSTAR Natural Gas Company (ENSTAR), the Alaska Pipeline Company, the Norstar Pipeline Company, Inc., and a 65% indirect interest in Cook Inlet Natural Gas Storage Alaska, LLC (CINGSA) (collectively, the “Alaska Utilities Business”). For additional details, please see DBRS Morningstar’s press release dated March 1, 2023.

The regulatory environment at TSU’s regulated utilities remained relatively stable over the past year. DBRS Morningstar expects future growth to come from the Company's regulated business because all of the capital expenditures (capex) is to be spent on its regulated utilities, and the majority of the capex is likely to be for planned system improvements and new growth opportunities at its existing utilities.

TSU’s financial performance has remained relatively stable. DBRS Morningstar expects the Company’s operating cash flow (OCF) to increase because of growth in the rate base. DBRS Morningstar also expects TSU to fund its capex and dividend payments with OCF and debt while maintaining its existing capital structure. The Stable trends reflect DBRS Morningstar’s expectation that the Company’s key credit metrics will remain supportive of the current credit ratings. DBRS Morningstar anticipates that TSU will continue to be the primary debt issuer with no additional material external debt at the operating companies.

Given that the Company’s size constrains its credit ratings, a positive credit rating action would require a material improvement in size. However, DBRS Morningstar may take a negative credit rating action if there is a substantial deterioration in TSU’s credit metrics from its current level or there is a material change in the business risk profile because of (1) an unlikely adverse change in the regulatory environment and/or (2) an acquisition or disposition.

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:
DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (September 27, 2023; https://www.dbrsmorningstar.com/research/421106/global-methodology-for-rating-companies-in-the-regulated-electric-natural-gas-and-water-utilities-industry).

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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