Morningstar DBRS Confirms North Battleford Power L.P. at A (low) With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed North Battleford Power L.P.'s (the Issuer or ProjectCo) Issuer Rating and Series A Senior Secured Amortizing Bonds credit rating at A (low) with Stable trends. Northland Power Inc. wholly owns ProjectCo, a limited partnership and special-purpose vehicle that owns and operates a 260-megawatt (nameplate capacity) combined-cycle baseload power generation facility (the Project) that has been in operation since June 5, 2013. The credit rating confirmations reflect the Project's current stable operating and financial performance and expectations of continued stable performance in 2024 and beyond.

KEY CREDIT RATING CONSIDERATIONS
The Project's 2023 debt service coverage ratio (DSCR) of 1.92 times (x) exceeded projections. The overall plant availability of around 97.3% in 2023 remained high. Morningstar DBRS notes that the Project has been consistently performing well and is likely to meet DSCR projections for 2024.

CREDIT RATING DRIVERS
Morningstar DBRS may take a positive rating action if the Project's performance continues to exceed expectations on a consistent basis. Morningstar DBRS may consider an adverse rating action if a material and sustained downward deviation from performance expectations (key risk factor) occurs.

FINANCIAL OUTLOOK
In 2024 and beyond, the Project is expected to meet projections. Specifically, the DSCR is expected to be around 1.72x in 2024.

CREDIT RATING RATIONALE
The credit ratings remain supported by (1) a highly supportive capacity-based long-term power purchase agreement (PPA) with a high-quality counterparty, (2) mature and proven technology, (3) structural enhancements, and (4) a strong Project sponsor and experienced operator. The key challenges include (1) performance risk and (2) single point of failure risk.

The Project benefits from a 20-year baseload PPA with Saskatchewan Power Corporation (SaskPower) that expires in June 2033. Morningstar DBRS notes that SaskPower's current credit profile does not constrain the credit ratings. The Project is approximately 150 kilometres northwest of Saskatoon on land owned by the Issuer.

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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

RATING DRIVERS AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of the Rating Driver Factors
-- In the analysis of North Battleford Power L.P., the Rating Driver factors listed in the methodology are considered in the order of importance.

(B) Weighting of the FRA Factors
-- In the analysis of North Battleford Power L.P., the following FRA factor listed in the methodology was considered more important: DSCR (this is the only applicable factor).

(C) Weighting of the Rating Drivers and the FRA
-- In the analysis of North Battleford Power L.P., 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 methodology:
-- Global Methodology for Rating Project Finance (April 15, 2024) https://dbrs.morningstar.com/research/431188

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 criteria has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781

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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