Morningstar DBRS Confirms North West Redwater Partnership at "A"/R-1 (low) with Stable Trend

DBRS Limited (Morningstar DBRS) resolved the Under Review with Developing Implications status of North West Redwater Partnership (NWR or Issuer), confirmed the Issuer Rating and the credit rating on NWR's Senior Secured Bonds at "A", and confirmed the credit rating on the Issuer's Commercial Paper program at R-1 (low). All trends are Stable. Morningstar DBRS placed the credit ratings Under Review with Developing Implications on December 19, 2024.

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 and the Province of Alberta's (Alberta or the Province; 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 (the Agreements) between the two toll payers and NWR. As such, given the dependency of NWR's credit ratings on those of CNRL and Alberta, the resolution of the Under Review with Developing Implications status of NWR's credit ratings follows a similar resolution of the Under Review with Negative Implications status of CNRL's credit ratings on February 28, 2025.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings of both CNRL (rated A (low) with a Negative trend) and the Province flow directly to form the basis of the credit ratings of NWR through the DSO structure of the Agreements between the two toll payers and NWR. Morningstar DBRS views NWR's credit rating level as being between the credit ratings of CNRL and the Province. Morningstar DBRS notes that for the purpose of the DSO, CNRL's credit rating of A (low) with a Negative trend is viewed as equivalent to a BBB (high) credit rating.

CREDIT RATING DRIVERS
Negative credit rating actions taken on the toll payers could result in a downgrade of NWR's credit ratings; however, we believe this is not likely at this time. A positive credit rating action is unlikely in the near term, either.

CREDIT RATING RATIONALE
The DSO commits the APMC and CNRL 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 CNR's 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 provides additional support to the credit ratings. As a result, Morningstar DBRS views NWR's credit rating level as being between the credit ratings of CNRL and the Province, at the "A" level. Additionally, APMC (Redwater) L.P.'s ownership of 50% of the equity interest in the Project, coupled with the APMC's willingness to extend its commitment to the Project by 10 years as part of the 2021 capital structure re-optimization, is viewed as supportive of this economic incentive and therefore positive to the Project.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on the Province of Alberta and CNRL are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Alberta and CNRL 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 Factors in Credit Ratings (August 13, 2024) 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 (February 3, 2025): https://dbrs.morningstar.com/research/447186/morningstar-dbrs-global-corporate-criteria

The following methodologies have also been applied:

Global Methodology for Rating Project Finance (December 10, 2024)
https://dbrs.morningstar.com/research/444393

Morningstar DBRS Criteria: Approach to ESG 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.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577