DBRS Morningstar Confirms North Battleford Power L.P. at A (low) With a Stable Trend

DBRS Limited (DBRS Morningstar) confirmed North Battleford Power L.P.’s (the Issuer or ProjectCo) Issuer Rating and Series A Senior Secured Amortizing Bonds rating at A (low) with Stable trends. Northland Power Inc. wholly owns ProjectCo, which is a limited partnership and special-purpose vehicle that owns and operates a 260-megawatt (nameplate capacity) combined-cycle baseload power generation facility that has been in operation since June 5, 2013. The facility benefits from a 20-year baseload power purchase agreement (PPA) with Saskatchewan Power Corporation (SaskPower) that expires in June 2033. DBRS Morningstar notes that SaskPower's current credit profile does not constrain the ratings. The project is approximately 150 kilometres northwest of Saskatoon on land owned by the Issuer. The confirmations reflect DBRS Morningstar's view that the project shall continue to perform as expected.

The project continues to perform well, and the project's debt service coverage ratio (DSCR) of 1.76 times for 2021 exceeded projections. The overall plant availability of 89.3% in 2021 was low, but it had been expected because of a planned major maintenance outage of the gas turbine in the second quarter of 2021. The project is expected to meet DSCR projections for 2022.

The ratings remain supported by (1) a highly supportive capacity-based long-term PPA with a high-quality counterparty, (2) mature and proven technology, (3) structural enhancements, and (4) a strong project sponsor and experienced operator. The key challenges include (1) performance risk and (2) a single point of failure risk.

If the project experiences sustained deterioration in its performance and/or increased operating and maintenance expenses with a significant impact on the DSCR, DBRS Morningstar may consider a negative rating action. An upgrade is possible if the project's performance materially exceeds projections on a consistent basis.

There were no Environmental/Social/Governance factor(s) 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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodology is Global Methodology for Rating Project Finance (September 6, 2022; https://www.dbrsmorningstar.com/research/402400), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

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.

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

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact 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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