DBRS Morningstar Confirms Ratings of Alberta PowerLine Limited Partnership at A (low), Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and the ratings on the Long Term Senior Bonds and the Medium Term Senior Bonds of Alberta PowerLine Limited Partnership (APL or ProjectCo) at A (low) with Stable trends. ProjectCo is the special-purpose vehicle created to design, build, finance, operate, and maintain the Fort McMurray West 500-kilovolt Transmission Project (the Project) under a 36.8-year Project Agreement with the Alberta Electric System Operator (AESO or the Authority).

Backed by a parent company guarantee from Canadian Utilities Limited (rated "A" with a Stable trend by DBRS Morningstar), ATCO Electric Ltd. (ATCO Electric) continues as the Operations, Maintenance, and Lifecycle Contractor (O&M Contractor) for APL. Since APL achieved energization on March 29, 2019, operations have progressed smoothly without any unplanned outages or deductions. ProjectCo and the O&M Contractor have made a number of minor warranty claims, 91% of which have been completely remediated by the Design-Build Joint Venture (DBJV), while the rest are either being remediated or in the planning stage. The DBJV has not disputed any of the warranty claims.

On September 13, 2021, the AESO issued a change order, which was subsequently confirmed on September 17, 2021, requiring ProjectCo to install protection and control circuit and equipment (the Remedial Action Scheme Installation) to accommodate a system reconfiguration because of a new generator added by the Authority. Relevant works are essentially complete, and APL has received the majority of the payments, expecting the rest to be received by Q1 2022. ProjectCo confirms that no changes have been made to the payment structure since financial close.

The Coronavirus Disease (COVID-19) pandemic has not had a material or negative impact on APL's ability to carry out its operation and maintenance activities. The Project is considered to be an essential service and therefore not subject to the lockdown restrictions.

While not currently anticipated, DBRS Morningstar may take a negative rating action should the Project experience material deterioration in operating performance and worsening trend of unplanned outages, leading to significant deductions and deterioration in credit metrics. Notwithstanding, DBRS Morningstar notes that operating requirements are of low complexity and fairly straightforward for an experienced contractor such as ATCO Electric. DBRS Morningstar views a positive rating action as unlikely in the near term.

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:
The principal methodology is Rating Public-Private Partnerships (August 19, 2021; https://www.dbrsmorningstar.com/research/383244), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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