Morningstar DBRS Assigns Credit Rating of "A" With Stable Trend to North West Redwater Partnership’s Senior Secured Notes Series P and Series Q Issuance

DBRS Limited (Morningstar DBRS) assigned a credit rating of "A" with a Stable trend to North West Redwater Partnership's (NWR or the Issuer) Senior Secured Notes Series P and Series Q issuance. Proceeds of $1.3 billion will be used to pay down both a portion of the Issuer’s outstanding term loan/revolving facility’s balance and a portion of the commercial paper outstanding balance.

The credit rating assigned to this newly issued debt instrument is based on the ratings of an already-outstanding debt series of the above-mentioned debt instrument.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings of both CNRL (rated A (low) with a Stable trend by Morningstar DBRS) and the Province of Alberta (rated AA with a Stable trend by Morningstar DBRS) flow directly to form the basis of the credit rating of NWR through the Debt Service Obligation (DSO) structure of the toll Processing Agreements between the two toll payers and NWR. The DSO commits the APMC and Canadian Natural Resources Limited to unconditionally ensure sufficient funds for debt service on a 75%/25% split, respectively, regardless of the operational status of the Project. The DSO is several and not joint, and a default by CNRL on its 25% of the DSO would theoretically lead to a default on the senior debt. However, Morningstar DBRS believes that the APMC has a potential incentive in the form of incremental revenue from the sales of refined products if CNRL should default to keep the Project operational until a solution, such as a replacement toll payer, is secured, which adds additional support to the rating. As a result, Morningstar DBRS views NWR’s rating level as being between the ratings of CNRL and the Province, at the "A" level.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
General Considerations
Credit rating actions on Canadian Natural Resources Limited (CNRL) and the Province of Alberta are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of CNRL or the Province of Alberta are discussed separately at https://dbrs.morningstar.com/issuers/3014 and https://dbrs.morningstar.com/issuers/66

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

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

Morningstar DBRS applied the following principal methodologies:
-- Morningstar DBRS Global Corporate Criteria (April 15, 2024); https://dbrs.morningstar.com/research/431186/morningstar-dbrs-global-corporate-criteria, which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Global Methodology for Rating Project Finance (April 15, 2024);
https://dbrs.morningstar.com/research/431188/global-methodology-for-rating-project-finance

-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024) https://dbrs.morningstar.com/research/427030

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 info-DBRS@morningstar.com.

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 info-DBRS@morningstar.com.

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