DBRS Morningstar Confirms Alectra Inc. at “A” and R-1 (low), Stable Trends

DBRS Limited (DBRS Morningstar) confirmed Alectra Inc.'s (Alectra or the Company) Issuer Rating and Senior Unsecured Debentures rating at "A" and Commercial Paper rating at R-1 (low), all with Stable trends. The ratings of Alectra are based on the Company's regulated electricity distribution operations, which provide the Company with very stable earnings and cash flow.

Alectra's business risk assessment remained stable in 2019, supported by the reasonable regulatory framework under the Ontario Energy Board (OEB). The Company has been allowed to defer rebasing until 2026, with rates to increase with inflation, less productivity and stretch factors, in between (1.7% for 2020). Alectra's financial risk assessment has also remained supportive of the current ratings. Given the regulated nature of the Company's operations, DBRS Morningstar expects the Company's key credit metrics to remain commensurate with the "A" rating range.

DBRS Morningstar had originally expected Alectra's earnings and cash flow to see a modest increase in 2020, in line with growth in the rate base. However, as a result of the ongoing Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar now expects a modest decrease for the Company. This impact is partly mitigated by (1) a high proportion of Alectra's revenues being fixed (65% of 2019 revenues), including for all residential customers, and (2) deferral accounts approved by the OEB for all Ontario utilities to accrue any costs or lost revenues arising from the coronavirus, with recovery subject to OEB approval. Overall, DBRS Morningstar expects key credit metrics for the Company to remain stable in 2020 and in line with the "A" ratings. A positive rating action is unlikely in the near term given the uncertainty caused by the coronavirus. A negative rating action could occur if Alectra's key credits metrics weaken to a level no longer commensurate with the current ratings.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodologies are Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (September 16, 2019); DBRS Morningstar Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (March 10, 2020); and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 25, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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