Morningstar DBRS Places North West Redwater Partnership's Credit Ratings Under Review With Developing Implications

DBRS Limited (Morningstar DBRS) placed North West Redwater Partnership's (NWR) Issuer Rating, Senior Secured Bonds credit rating, and Commercial Paper credit rating Under Review with Developing Implications. This follows Morningstar DBRS' placement of Canadian Natural Resources Limited's (CNRL) credit ratings Under Review with Negative Implications earlier this year. NWR, a partnership between CNR (Redwater) Limited, a subsidiary of CNRL, and APMC (Redwater) L.P., a subsidiary of Alberta Petroleum Marketing Commission (APMC), is responsible for the ownership and operation of a 50,000 barrel per day bitumen refinery (the Project) in Alberta's oil sands and refinery and pipeline hub.

Both CNRL's and the Province of Alberta's (Alberta; rated AA with a Stable trend) credit ratings flow directly to form the basis of NWR's credit ratings 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 CNRL to unconditionally ensure sufficient funds for debt service on a 75%/25% split, respectively, regardless of the Project's operational status. As such, given the dependency of NWR's credit ratings on those of CNRL and Alberta, NWR's Under Review with Developing Implications status follows CNRL's Under Review with Negative Implications status.

Morningstar DBRS expects that, upon resolution of CNRL's Under Review with Negative Implications status, CNRL's credit ratings may carry a Negative trend or Morningstar DBRS may downgrade CNRL's credit ratings by a maximum of one notch. Either outcome may not necessarily cause Morningstar DBRS to downgrade NWR's credit ratings; hence, Morningstar DBRS is placing NWR Under Review with Developing Implications. However, Morningstar DBRS notes that, should CNRL be downgraded more than one notch, a negative credit rating action on NWR is likely to follow.

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.

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

Morningstar DBRS applied the following principal methodology:
-- Morningstar DBRS Global Corporate Criteria (April 15, 2024), https://dbrs.morningstar.com/research/431186

The following methodologies have also been applied:
-- Global Methodology for Rating Project Finance (April 15, 2024), https://dbrs.morningstar.com/research/431188
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), http://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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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