DBRS Morningstar Confirms Ratings of Kingston Solar LP at BBB with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed Kingston Solar LP’s (ProjectCo) Issuer Rating as well as the ratings of its 3.571% Series 1A-2016 Senior Secured Notes and 3.571% Series 1B-2016 Senior Secured Notes at BBB with Stable trends. ProjectCo is a special-purpose vehicle that owns and operates a 100-megawatt alternating-current ground-mounted solar photovoltaic generation facility (the Facility) in the City of Kingston and Loyalist Township, Ontario. The rating confirmations reflects ProjectCo’s relatively stable performance for the last twelve months (LTM) ended December 31, 2022, following a forced outage in December 2021, which caused the Facility to go offline from December 5, 2021, till February 6, 2022. The event was qualified as an insurable event and ProjectCo received $3.3 million in an insurance claim.

For the LTM ended December 31, 2022, generation was 96.5% of the one-year P90 rating-case forecasts. DBRS Morningstar notes generation for the LTM December 31, 2022, was affected by the December 2021 event. Excluding the impact of the forced outage, pro forma generation would be around 99.7%. The debt service coverage ratio (DSCR) for 2022 was stable at 1.43 times (x) as insurance proceeds offset the revenue loss from the forced outage. The DBRS Morningstar-adjusted DSCRs was 1.42x and calculated by excluding the insurance proceeds but adjusting for the forced outage for January 2022. The DSCR levels continue to support the current ratings. DBRS Morningstar expects that ProjectCo's performance will stabilize for the foreseeable future.

DBRS Morningstar maintains its rating-case projection of a constant DSCR of 1.40x for the remaining debt term beyond 2022 and expects the trends on the ratings to remain Stable for the next 12 months. However, frequent forced outages as well as material and sustained underperformance (versus the rating case) could cause a negative rating action in the future. DBRS Morningstar notes that a positive rating action is unlikely in the near to medium term.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
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 (May 17, 2022).

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

PXX = exceedance probabilities. A P50-P90-P99 value describes estimated minimum electricity generation with a probability of 50%, 90%, or 99% in any given year (P50, one-year P90, and one-year P99). Unless otherwise specified, all PXX values in this press release are in reference to one-year PXX values, adjusted by DBRS Morningstar, considering degradation and other factors.

DBRS Morningstar applied the following principal methodology:
-- Global Methodology for Rating Solar Power Projects (September 6, 2022; https://www.dbrsmorningstar.com/research/402404).

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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