Morningstar DBRS Confirms the Province of Saskatchewan at AA (low) and R-1 (middle), Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating, Long-Term Debt credit rating, and Short-Term Debt credit rating of the Province of Saskatchewan (Saskatchewan or the Province) at AA (low), AA (low), and R-1 (middle), respectively. All trends are Stable. The Province remains well positioned to withstand the deterioration in its financial outlook and any potential weakness in the macroeconomic backdrop and/or commodity price volatility without materially eroding its credit profile.

KEY CREDIT RATING CONSIDERATIONS
For the year ended March 31, 2025, the Province reported a deficit of $248.9 million, compared with a surplus of $182.2 million in the prior fiscal year. The Province expects a modest surplus of $12.0 million in 2025-26; however, the high capital spending translates into a Morningstar DBRS-adjusted shortfall of $1.0 billion, or 0.9% of GDP. The Province anticipates small annual surpluses between F2027 and F2029 (adjusted deficits declining to 0.5% from 0.8% over this period). These projections do not include potential effects of sustained unfavourable trade dynamics with the U.S. and could present further downside risks. Nevertheless, we believe the Province has flexibility within its current credit ratings to withstand a period of deficits and higher debt.

Saskatchewan's debt has risen in recent years to fund the Province's capital plan and to offset deficits. However, we anticipate it will remain manageable for the current credit ratings provided the economy continues to grow. We estimate that the adjusted debt-to-GDP ratio should average roughly 24.3% annually between F2026 and F2029. This adjusted debt ratio peaked during the pandemic years at slightly above 29.0% in F2021 and F2022.

The Province forecasts real GDP growth of 1.8% in 2025, 2.0% in 2026, and averaging 2.2% over the subsequent three years. Steady population growth, favourable labour market conditions, anticipated new public and business investment, and efforts to diversify Saskatchewan's exports to new markets should lend stability to the economic outlook. However, sustained trade uncertainty, weaker commodity prices, and unfavourable crop conditions could present risks.

CREDIT RATING DRIVERS
An upgrade could result from a combination of an improvement in one or more critical risk factors and sustained improvement in key financial risk metrics. A downgrade could result from material deterioration in the debt-to-GDP ratio beyond current expectations, in conjunction with material weakness in one or more critical risk factors.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
General Considerations
ESG considerations had a relevant effect on the credit analysis.

Environmental (E) Factors
The following Environmental factor had a relevant effect on the credit analysis: Carbon and Greenhouse Gas (GHG) Costs. Saskatchewan is the fourth-largest GHG emitter (mainly from oil and gas, agriculture, and electricity) among Canadian provinces, and its GHG emissions are the second highest on a per-capita basis.

There were no Social/Governance factor(s) 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 (May 16, 2025), https://dbrs.morningstar.com/research/454196.

CRITICAL RISK FACTORS (CRFs) AND FINANCIAL RISK ASSESSMENT (FRA)

A) Weighting of CRFs
In the analysis of Saskatchewan, the CRFs are considered in the order of importance contemplated in the methodology.

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

C) Weighting of the CRFs and the FRA
In the analysis of Saskatchewan, the CRFs carry greater weight than the FRA.

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

Morningstar DBRS applied the following principal methodology:
-- Rating Canadian Provincial and Territorial Governments (April 25, 2025) https://dbrs.morningstar.com/research/452575

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 methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

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.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Aditi Joshi, Vice President
Rating Committee Chair: Thomas R. Torgerson, Managing Director
Initial Rating Date: May 15, 1987

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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