DBRS Morningstar Confirms Elexicon at “A” With a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of Elexicon Corporation (Elexicon or the Company) at “A” with a Stable trend. Elexicon was formed on April 1, 2019, through the amalgamation of Veridian Corporation and Whitby Hydro Energy Corporation (Whitby Hydro). Elexicon's rating continues to be supported by its stable regulated operations, reasonable financial profile, and supportive shareholders.

In 2020 the coronavirus pandemic resulted in Elexicon having increased costs and customer defaults compared with 2019. However, these increased costs did not materially affect the company's financial results. DBRS Morningstar notes that, as the coronavirus pandemic and associated restrictions continue into 2021, it remains unclear how this will affect revenues and customer defaults in 2021. However, any further increased costs and customer defaults would largely be mitigated by Elexicon's liquidity position and reasonable financial profile.

Elexicon's financial risk profile remained strong in 2020, with all key credit metrics supportive of the current rating category. DBRS Morningstar expects that Elexicon's financial ratios will deteriorate moderately in the near term as the Company completes the Seaton Municipal Transformer Station project (estimated cost of $40 million) and other capital expenditure projects that are expected to be partially financed with debt. However, DBRS Morningstar also expects that the Company’s financial metrics will remain in the "A" category and supportive of the rating in the future. DBRS Morningstar notes that a significant portion of Elexicon's total debt outstanding is owed to its shareholders, which provides the Company with additional flexibility.

DBRS Morningstar does not expect to take a positive rating action on Elexicon in the near term. However, a negative rating action could occur if the Company's key credit metrics deteriorate to a level no longer in line with the current ratings or its liquidity position becomes significantly strained from high payment defaults because of the continuing coronavirus pandemic.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (October 27, 2020; https://www.dbrsmorningstar.com/research/368939), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodology includes the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262)

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.

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