Morningstar DBRS Confirms Bruce Power L.P. Credit Ratings at BBB With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Notes rating of Bruce Power L.P. (BPLP or the Partnership) at BBB both with Stable Trends.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations and stable trends reflect BPLP’s stable business risk profile underpinned by the inflation-indexed fixed-price Implementation Agreement and its robust credit metrics.

CREDIT RATING DRIVERS
Morningstar DBRS believes that the successful completion of the Unit 6 MCR has demonstrated BPLP’s ability to manage the MCR work. Morningstar DBRS expects BPLP to apply the lessons learned and experience in completing the Unit 6 MCR for future MCR projects. BPLP should also benefit from continuation of staff and vendor continuity, automations, and other innovations ahead into future MCR projects. Although Morningstar DBRS views the successful completion of the Unit 6 MCR to partially mitigate the capex risk, capex risk is expected to be elevated until all MCR projects are completed, which is expected in 2033. BPLP removed Unit 3 from service in 2023 for MCR construction, with Unit 3 expected to return to service in late 2026. Morningstar DBRS may take a positive rating action if BPLP successfully completes the Unit 3 MCR project on time and on budget.

EARNINGS OUTLOOK
EBITDA is expected to increase in 2024 from 2023 reflect higher forecast generation from fewer MCR outage days and increased contract prices. Morningstar DBRS expects EBITDA to decrease slightly in 2025 and 2026 because of increased outage days from the MCR schedule.

FINANCIAL OUTLOOK
Morningstar DBRS does not expect BPLP’s financial profile to be materially affected by macroeconomic factors because of the revenue stability from the inflation-indexed fixed-price Implementation Agreement. Morningstar DBRS expects the capital expenditures (capex) tied to the Unit 3 MCR and future MCR projects to be primarily funded by timely mandatory capital calls to the owners, which are investment-
grade credit quality. Morningstar DBRS expects BPLP’s key credit metrics remain at or above the high end of the BBB rating category for independent power producers.

CREDIT RATING RATIONALE
BPLP’s credit ratings are supported by the stable business risk profile and solid financial risk profile. This is partially offset by relatively heavy capital expenditures required for the MCR, cost overrun and delay risks of the life-extension projects, and the inherent risk of operating a single-site nuclear power facility.

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 (23 January 2024) https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria:-approach-to-environmental,- social,-and-governance-risk-factors-in-credit-ratings

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of BRA Factors
In the analysis BPLP, the BRA factors were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of BPLP, the FRA factors were considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of BPLP, the BRA carries greater weight than the FRA.

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

Morningstar DBRS applied the following principal methodology: Global Methodology for Rating Companies in the Regulated Utility and Independent Power Producer Industries (15 April 2024)
https://dbrs.morningstar.com/research/431184.

The following methodologies have also been applied: Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024) https://dbrs.morningstar.com/research/427030.

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (April 15, 2024), https://dbrs.morningstar.com/research/431186, which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

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/431153.

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 info-DBRS@morningstar.com.

The credit rating was not 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 did not have 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 info-DBRS@morningstar.com.

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