Morningstar DBRS Confirms All Ratings on Clover Limited Partnership at BBB With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating of Clover Limited Partnership (the Issuer) and the ratings on its Series A Senior Notes and Series B Senior Notes at BBB with Stable trends. The Issuer, an indirect and wholly owned subsidiary of Canada Pension Plan Investment Board, is a special-purpose vehicle that owns a 49% interest in Enbridge Canadian Renewable LP (the Joint Venture ), with the remaining 51% owned by Enbridge Pipelines Inc. and Enbridge Income Partners Holdings Inc. The Joint Venture owns an approximate 74% interest (1,030 megawatts (MW)) in a 1,392-MW portfolio (the Portfolio) of 10 operating wind-power-generating facilities (with a total capacity of approximately 1,292 MW) and three operating solar-power-generating facilities (with a total capacity of 100 MW; collectively, the Facilities or Assets) across Canada. The Issuer's interest in the Portfolio (the Issuer's Portfolio) amounts to approximately 36%. The credit rating confirmations reflect the Portfolio's current stable operating and financial performance and expectations of continued stable performance in 2024 and beyond.

KEY CREDIT RATING CONSIDERATIONS
In 2023, the Portfolio's (and, correspondingly, the Issuer's Portfolio) overall generation was below projected P50 levels and close to projected P90 levels. The average availability in 2023 was healthy at around 98%, and the project's debt service coverage ratio (DSCR) was approximately 1.50 times (x), exceeding its rating case (based on P90 generation levels) DSCR of 1.34x. In 2023, generation from the wind projects was lower than projected P50 levels because of low wind resource across the wind fleet. The solar projects generation was higher than P50 levels. Morningstar DBRS notes that the Portfolio has consistently performed well and for three of the last four years, Portfolio generation has been at or above P50 generation levels.

CREDIT RATING DRIVERS
Morningstar DBRS may consider an adverse rating action if the Issuer's Portfolio experiences sustained underperformance compared with the rating case; for example, an increase in operating and maintenance (O&M) expenses, reduced availability with material impact on the DSCR, and/or deterioration in the credit profile of the power purchase agreements/swap counterparties. Morningstar DBRS may take a positive rating action in the near to medium term if the Issuer's Portfolio continues to perform materially better than the rating case, including generation above P50 levels, on a consistent basis.

FINANCIAL OUTLOOK
In 2024, the DSCR is expected to meet or exceed the rating case minimum DSCR of 1.34x. The overall performance is expected to remain stable beyond 2024 as well.

CREDIT RATING RATIONALE
The credit ratings remain supported by (1) long-term contracted revenues with highly creditworthy offtakers, (2) good operating track record with cash flows supported by a regionally diversified asset base, (3) upside potential from merchant revenues from Alberta wind facilities, and (4) an experienced owner-operator. The credit ratings are constrained by (1) uncertainty about wind/solar resource and energy production, (2) O&M and capex risks, and (3) a weaker-than-standard security package

The Issuer benefits from cashflows generated from a regionally diverse portfolio of 10 wind-power-generating projects and three solar-power-generating projects located in Canada and contracted with highly creditworthy offtakers.

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

RATING DRIVER AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of Rating Driver Factors 
In the analysis of the Issuer, the Rating Driver factors listed in the methodologies were considered in the order of importance.

(B) Weighting of FRA Factors 
In the analysis of the Issuer, the following FRA factor listed in the methodologies was considered more important:
-- DSCR (this is the only applicable factor).

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

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

Morningstar DBRS applied the following principal methodologies:
-- Global Methodology for Rating Wind Power Projects (April 15, 2024), https://dbrs.morningstar.com/research/431200

-- Global Methodology for Rating Solar Power Projects (April 15, 2024), https://dbrs.morningstar.com/research/431194

Morningstar DBRS credit ratings may use of 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 methodology 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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