DBRS Morningstar Confirms Grand Renewable Solar LP at BBB With Stable Trends

DBRS, Inc. (DBRS Morningstar) confirmed Grand Renewable Solar LP’s (ProjectCo or the Issuer) Issuer Rating and the ratings on the 3.926% Series 1A-2016 Senior Secured Notes and 3.926% Series 1B-2016 Senior Secured Notes (collectively, the Notes) at BBB. All trends are Stable. The pari passu Notes, with an outstanding balance of approximately $451.5 million, will fully amortize by the January 31, 2035, maturity date. The rating confirmations reflect ProjectCo’s relatively stable performance and operating expense profile over the review period.

ProjectCo, a special-purpose vehicle, owns and operates a 100-megawatt alternating-current ground-mounted solar photovoltaic (PV) generation facility. It also owns a 50% interest in the associated 20-kilometre transmission facilities connecting the PV facility to Hydro One Networks Inc.’s electricity grid (collectively, the Project or the Facility). ProjectCo sells all generated electricity to the Independent Electricity System Operator (IESO) under a 20-year fixed-price power purchase agreement (PPA) until March 30, 2035. The off-taker IESO has a credit quality of high investment grade, which does not constrain ProjectCo's ratings.

For the 12-month periods ended December 31, 2021 (LTM 2021), and March 31, 2022 (LTM 2022), the operations remained smooth; the DBRS Morningstar-adjusted debt service coverage ratios (DSCR) were 1.49 times (x) and 1.47x, respectively. The Project's 12-month actual generation represented 104.8% and 102.8% of the P90 level (the rating case) for the LTM 2021 and LTM 2022, respectively. Such generation levels were only slightly below the forecast P50 levels.

The improved financial performance in YE2021 and the LTM 2022, compared with YE2020, was driven by higher insolation levels and stable operating costs. DBRS Morningstar also notes that the Facility has (1) maintained a high availability of 99% and (2) conducted annual site testing and observed no material degradation in the panel’s performance. To date, IESO has sufficiently compensated ProjectCo for the curtailment loss under the PPA.

DBRS Morningstar expects the trends on the ratings to remain stable for the next 12 months. A material and sustained underperformance of ProjectCo, compared with the rating case, could cause a negative rating action, whereas a material and consistent outperformance compared with the rating case may cause a positive rating action.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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.

PXX means exceedance probabilities. A P50-P90-P99 value describes the estimated minimum electricity generation with a probability of 50%, 90%, or 99% in any given year (P50, one-year P90, and one-year P99).

The principal methodology is Rating Solar Power Projects (August 18, 2021; https://www.dbrsmorningstar.com/research/383184), 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 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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