DBRS Limited (DBRS Morningstar) confirmed Comber Wind Financial Corporation’s (the Issuer) Issuer Rating and the rating on the $450 million Series 1 Senior Secured Bonds (the Bonds), due November 15, 2030, at BBB with Stable trends. The Issuer is the financing vehicle of 2016 Comber Wind Limited Partnership (ProjectCo), a special-purpose entity that owns the 82.8-megawatt (MW) Comber East project and the adjacent 82.8 MW Comber West wind project (together, the Project) located in Essex County, Ontario. As at December 31, 2019, $323.1 million of Bonds were outstanding.
The Project commenced commercial operations in November 2011, generating an average of approximately 473.5 gigawatt hours (GWh) annually to YE2019, which is 8.0% above the annual P90 production forecast of 438.4 GWh and 9.0% above the rating case forecast of 434.3 GWh. The P50 planned generation is 500.7 GWh, as per the resource consultant’s (Underwriters Laboratories Inc. or UL) wind assessment. The P50 has not been achieved because of less favourable wind conditions, although generation was quite close to the P50 in 2013 and 2014. Revenue for the Project mirrors the generation.
ProjectCo’s debt service coverage ratio (DSCR) has been above the rating case projected average and minimum DSCRs of 1.40 times (x) and 1.38x, respectively. Yearly DSCRs have been 1.55x for 2019, 1.54x for 2018, 1.63x for 2017, 1.55x for 2016, and 1.53x for 2015. The rating case forecast assumes modest curtailment, with net production at 434 GWh until 2026 (when the curtailment cap is reached; the curtailment cap is likely to be reached earlier, in 2025, based on actual curtailment). A modest cost for negative hourly Ontario energy price (HOEP) is also assumed in the rating case. If wholesale electricity prices are negative, ProjectCo is not protected, which would reduce the effective price received.
ProjectCo benefits from fully contracted power prices at attractive rates under two Feed-In Tariff (FIT) contracts (for Comber East and Comber West) with the Independent Electricity System Operator (IESO; rated A (high) with a Stable trend by DBRS Morningstar). The contract expires 12 months after the maturity of the Bonds. For 20 years until November 2031, the IESO pays to ProjectCo the difference between a fixed but partially indexed price, which was $143.9/MWh for 2019, and the market price received in Ontario.
Going forward, DBRS Morningstar may take a positive rating action if the Project consistently performs at or above the P50 level going forward with commensurate DSCRs. Similarly, a negative rating action could be taken if the Project consistently underperforms below the P90 level. The rating is constrained by (1) the inherent uncertainty with wind forecasts, (2) operating and maintenance cost management, and (3) exposure to negative HOEP prices. These risks are partially mitigated by the Project’s actual performance, ability to maintain cost discipline, and minimal exposure to negative HOEP prices.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
All figures are in Canadian dollars unless otherwise noted.
PXX means 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).
The principal methodologies are Rating Wind Power Projects (August 21, 2019) and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 22, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.
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