DBRS Morningstar Confirms Ratings on Bruce Power L.P. at BBB with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Notes rating of Bruce Power L.P. (BPLP or the Partnership) at BBB with Stable trends. The rating confirmations reflect BPLP’s stable business risk profile underpinned by the inflation-indexed fixed-price Implementation Agreement, its robust credit metrics, and the continuing good progress of the Unit 6 Major Component Replacement (MCR) project. The Stable trends reflect DBRS Morningstar's view that no material changes to BPLP’s credit fundamentals are expected for the next 12 months and also reflect the expected continuing progress of the Unit 6 MCR.

EBITDA was $1.4 billion for both 2021 and the last 12 months ended March 31, 2022, which met management's initial guidance. The achieved EBITDA was robust relative to the historical average over the past five years. In addition, there has been no material increase in the total debt amount for the review period. As a result, BPLP’s key credit metrics continue to be at or above the high end of the BBB rating category for independent power producers rated by DBRS Morningstar. The volatility of macroeconomic factors is expected to have limited impact on BPLP's financial performance given the revenue stability underpinned by the inflation-indexed fixed-price Implementation Agreement. The Unit 6 MCR has been progressing well, with schedule and costs largely tracking the original plan.

For 2022, DBRS Morningstar expects revenue and EBITDA to be slightly higher than those achieved in 2021, driven by higher contract prices under the Implementation Agreement. The increased capital expenditures tied to the Unit 6 MCR and Unit 3 MCR preparation will be primarily funded by mandatory capital calls to owners. No net distributions (after capital calls) to owners are expected in 2022. The key credit metrics are expected to remain at or above the high end of the BBB rating category.

DBRS Morningstar expects the ratings to remain stable for the next 12 months for the reasons explained above. A rating upgrade in the immediate future is unlikely given that the complex life-extension projects are now in full swing. On the other hand, a rating downgrade would likely be triggered by (1) a significant and sustained deterioration of credit metrics and/or (2) material cost overruns and delays associated with the life-extension projects.

ESG CONSIDERATIONS

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/396929.

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

The principal methodology is Rating Companies in the Independent Power Producer Industry (May 18, 2022; https://www.dbrsmorningstar.com/research/396971, 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 (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).

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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