Morningstar DBRS Confirms Ratings on Mountain View Partners GP at A (low) With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed Mountain View Partners GP (MVP or ProjectCo)'s Issuer Rating and the rating on MVP's $380.8 million Series A Bonds (the Bonds) at A (low). Both trends are Stable. ProjectCo is the special-purpose entity (SPE) created to design, build, finance, operate, and maintain the Southwest Calgary Ring Road Project (the Project) under a 35-year project agreement (PA) with the Province of Alberta (rated AA with a Stable trend by Morningstar DBRS).

KEY CREDIT RATING CONSIDERATIONS
The Priority New Infrastructure (PNI) Traffic Availability was achieved on October 1, 2020, and the Remaining New Infrastructure (RNI) Traffic Availability on October 1, 2021, as scheduled. The Project achieved Construction Completion in December 2022.

CREDIT RATING DRIVERS
Given the availability-based payment structure and little potential for meaningful improvement in the financial forecast, a rating upgrade is considered unlikely. Morningstar DBRS notes that a material deterioration of the financial metrics may result in a negative rating action.

FINANCIAL OUTLOOK
For the 12-month operating period from October 2022 to September 2023 and the 12-month period from April 2023 to March 2024, the debt service coverage ratio (DSCR) was 1.24 times (x) and 1.23x, respectively (excluding the impact of debt service reserve accounts (DSRA) withdrawals). The minimum DSCR was projected to be 1.20x, which is standard for availability-based public-private partnership (PPP) projects rated in the "A" range. The equity lockup DSCR is set as 1.135x, which is lower than is typically seen but is considered appropriate for the rating, given the operations and maintenance (O&M) cost resilience of 45.4% and lifecycle cost resilience of 33.0%.

CREDIT RATING RATIONALE
The credit ratings reflect the Project's financial outlook, underpinned by strengths that include low public-sector counterparty risk, straightforward O&M requirements, and bondholders' step-in rights. Challenges include ProjectCo retaining lifecycle and handback risk.

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 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.

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

(A) Weighting of Rating Driver Factors
In the analysis of the Issuer, the relative weighting of the Rating Driver factors in the availability-based section was approximately equal.

(B) Weighting of FRA Factors
In the analysis of the Issuer, the following FRA factor in the availability-based section was considered more important: O&M/Lifecycle Break-Even Ratios.

(C) Weighting of the Rating Driver and the FRA
In the analysis of the Issuer, the FRA carries greater weight than the Rating Driver.

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

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Public-Private Partnerships (April 15, 2024)
https://dbrs.morningstar.com/research/431193

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 following criteria has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 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/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 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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