Morningstar DBRS Assigns Credit Ratings of BBB (high), Stable to NGTL Limited Partnership, Discontinues Credit Rating on NOVA Gas Transmission Ltd.

DBRS Limited (Morningstar DBRS) assigned an Issuer Rating and a Medium-Term Notes & Unsecured Debentures rating of BBB (high) to NGTL Limited Partnership (NGTL LP). The trends on both credit ratings are Stable. Morningstar DBRS also discontinued and withdrew its BBB (high) credit rating on NOVA Gas Transmission Ltd.’s (NGTL) Medium-Term Notes & Unsecured Debentures.

KEY CREDIT RATING CONSIDERATIONS
Morningstar DBRS discontinued its credit rating on NGTL to reflect the fact that NGTL has been reorganized into a new limited partnership, NGTL LP. NGTL has transferred the NGTL System Assets to NGTL LP and NGTL LP has assumed all of NGTL’s debt at the same terms and conditions. Morningstar DBRS notes that as part of the reorganization, NGTL redeemed the $100 million 9.90% Debentures, Series 23 due December 2024.

Following a review of the documentation related to the reorganization, Morningstar DBRS assigned a credit rating to NGTL LP’s Medium-Term Notes & Unsecured Debentures that was the same as the one NGTL had previously. TransCanada PipeLines Limited (TCPL; rated BBB (high) with a Stable trend by Morningstar DBRS) owns all of the partnership interests in NGTL LP, and the new intercompany debt at NGTL LP from TCPL is mostly on identical terms to the intercompany debt previously at NGTL.

CREDIT RATING DRIVERS
NGTL LP’s credit ratings are based on the assumption of strong implicit support from its parent, TCPL. Morningstar DBRS expects TCPL to continue to provide financial, liquidity, and operational support to NGTL LP. Consequently, a change in NGTL LP’s credit ratings is likely to be triggered by a change in TCPL’s credit rating.

CREDIT RATING RATIONALE
The NGTL system is a material and integral part of TCPL’s natural gas infrastructure and connects natural gas production from the Western Canadian Sedimentary Basin to both domestic and international markets, including via TCPL’s other pipelines. The NGTL system is also critical to TCPL’s Canadian Mainline and for new pipeline connectivity to exports through the Coastal GasLink pipeline project, and contributed approximately 20% to TCPL’s 2023 comparable EBITDA. Based on an operating agreement, TCPL provides all administrative and operating services necessary to operate the NGTL facilities as well as project development and logistics support to NGTL LP’s expansion plans. Approximately 96% of NGTL LP’s total outstanding debt is due to TCPL. It is TCPL’s strategic intention to continue providing financial support to NGTL LP by borrowing more efficiently at the corporate level. Consequently, Morningstar DBRS assumes strong implicit support from TCPL to NGTL LP.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

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

Morningstar DBRS applied the following principal methodology:
-- DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (March 28, 2023),
https://dbrs.morningstar.com/research/411694

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

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.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.

Morningstar DBRS 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. Morningstar DBRS trends and credit ratings are under regular surveillance.

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

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