Commentary

Ontario's Nuclear Outlook Brightens: Proposed Regulatory Amendments Seen as Credit Positive for SMRs and Refurbishments

Sub-Sovereign Governments, Utilities & Independent Power

Summary

The commentary "Ontario's Nuclear Projects: Proposed Regulatory Amendments for North America's First Small Modular Reactors are Credit Positive" examines the credit implications of the new Darlington small modular reactor (SMR) project and the proposed regulatory concurrent cost recovery (CCR) mechanism to allow Ontario Power Generation (OPG) to recover interest costs on debt incurred during the construction phase.

Key findings include:

-- Ontario launched North America's first commercial, grid-scale SMR construction to secure long-term energy system reliability and build leadership in emerging nuclear technologies.
-- The proposed regulatory framework considers a CCR mechanism, and enables equity participation from Indigenous communities and public and private parties.
-- OPG's financial resilience during the construction period could be meaningfully enhanced, assuming successful implementation of the CCR regulatory framework and effective execution of SMR development schedule.

"We treat the CCR framework as credit positive for OPG's credit rating," said David Li, Vice President, Morningstar DBRS. "The CCR has a positive impact on the regulated utility's operating cash flow during the construction period, thereby reducing the need for more debt."

Enjoying our exclusive insights?

Register for a free account to get unrestricted access to our in-depth research, presale and ratings reports, and more. Access is limited for unregistered users.