Morningstar DBRS Changes Trends on Bruce Power L.P. to Positive From Stable, Confirms Credit Ratings at BBB

DBRS Limited (Morningstar DBRS) changed the trends on Bruce Power L.P.'s (BPLP) Issuer Rating and the credit rating on its Senior Unsecured Notes to Positive from Stable and confirmed the credit ratings at BBB.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations reflect BPLP's stable business risk profile underpinned by the inflation-indexed, fixed-price Implementation Agreement and its robust credit metrics. The Positive trends reflect Morningstar DBRS' view that BPLP's exposure to capital expenditure (capex) risk has been reduced following the successful completion of the Major Component Replacement (MCR) for Unit 6 under budget and ahead of time, as well as the well-managed ongoing MCR for Unit 3 and Unit 4. Additionally, Morningstar DBRS does not expect any material impact on BPLP from the incoming U.S. tariffs on Canadian goods, because majority of BPLP's supply chain is in Canada and BPLP's inflation linked contract with IESO provides protection against any materials or staff cost increases. Morningstar DBRS considers the early and under-budget completion of the Unit 6 MCR project a clear demonstration of BPLP's strong capability in managing MCR-related work. Morningstar DBRS expects that BPLP will leverage the insights and operational experience gained from the Unit 6 MCR to enhance the execution of future MCR projects. Continued benefits from staff and vendor continuity, as well as the implementation of automation and other process initiatives, should further support future project execution. While the successful completion of Unit 6 helps mitigate some of the capex risk, Morningstar DBRS maintains the view that capex risk will remain elevated until all MCR projects are finalized, which is anticipated by 2033. Morningstar DBRS notes that Unit 3 MCR is progressing well, with both schedule and budget being effectively managed, and is expected to return to service by the end of 2026. In addition, BPLP commenced the Unit 4 MCR in February 2025, with a projected completion in 2028.

CREDIT RATING DRIVERS
We may consider upgrading Bruce Power L.P.'s (BPLP or the Partnership) credit ratings if BPLP maintains its business risk and financial risk while remaining on time and on budget with the Unit 3 Major Component Replacement (MCR) project. Although it is unlikely, we could consider changing the trend back to stable should BPLP fail to manage the MCR projects on budget and on time, and there be cost overruns that result in significant stranded costs or if there were a significant deterioration in BPLP's financial risk assessment.

EARNINGS OUTLOOK
BPLP's EBITDA in 2024 was significantly improved compared with that in 2023 because of the increased contract prices and higher generation output driven by the back-to-service of Unit 6. Morningstar DBRS expects EBITDA to decrease slightly in 2025 because of increased outage days from the MCR schedule but also expects BPLP's EBITDA to increase in 2026 with the completion of the Unit 3 MCR project.

FINANCIAL OUTLOOK
BPLP's key credit metrics in 2024 have remained supportive of the current credit ratings and Morningstar DBRS does not expect BPLP's financial profile to be materially affected by macroeconomic factors because of the revenue stability from the inflation-indexed fixed-price Implementation Agreement. Morningstar DBRS expects the capex tied to the Unit 3 MCR and future MCR projects to be primarily funded by timely mandatory capital calls to the owners, which are investment-grade credit quality. Morningstar DBRS expects BPLP's key credit metrics to remain at or above the high end of the BBB credit rating category for independent power producers.

CREDIT RATING RATIONALE
BPLP's credit ratings are supported by the stable business risk profile and solid financial risk profile. This is partially offset by relatively heavy capex required for the MCR, cost overrun and delay risks of the life-extension projects, and the inherent risk of operating a single-site nuclear power facility. The key credit metrics of BPLP are solid and supportive of BPLP's current credit ratings, which are expected to maintain or modestly improve in the near to medium term.

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.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of BRA Factors
In the analysis of BPLP, the BRA factors are considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of BPLP, the FRA factors are considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of BPLP, the BRA carries greater weight than the FRA.

Morningstar DBRS notes that this Press Release was updated on April 8, 2025, to include the BRA/FRA disclosures.

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

Morningstar DBRS applied the following principal methodology:

-- Global Methodology for Rating Companies in the Regulated Utility and Independent Power Producer Industries (November 25, 2024) https://dbrs.morningstar.com/research/443429

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have 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 not 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 did not have 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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