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 and the Guarantor), a special-purpose entity (SPE) 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, 2021, $279.0 million of the Bonds were outstanding.
The Project commenced commercial operations in November 2011, generating an average of approximately 465.4 gigawatt hours (GWh) annually to YE2021, which is 6.2% above the annual P90 production forecast of 438.4 GWh and 7.2% above the rating case forecast of 434.3 GWh. The P50 planned generation level is 500.7 GWh, as per the resource consultant's (Underwriters Laboratories Inc. or UL) wind assessment. The Project has not achieved the P50 generation level because of less favourable wind conditions compared with plan, although it approximated the P50 in 2013 and 2014. Revenue for the Project mirrors the generation. In 2021, the generation achieved was 412.7 gigawatt hours (GWh), approximately 5% below the rating case forecast as a result of particularly unfavourable wind conditions. The Project has not experienced any serious operational issues.
Since the first full year of debt service in 2013, ProjectCo's annual 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. For the 12 months ended December 31, 2021, the Project achieved a DSCR of 1.43x, dampened from previous years because of relatively lower generation and revenue. The rating case forecast assumes modest curtailment, with net production at 434 GWh until 2026 (when the curtailment cap is reached). A modest cost for negative hourly Ontario energy prices (HOEP) is also assumed in the rating case. If wholesale electricity prices are negative, which would reduce the effective price received, ProjectCo is not protected.
ProjectCo benefits from fully contracted power prices at attractive rates under two feed-in tariff (FIT) contracts (one each for Comber East and Comber West) with the Independent Electricity System Operator (IESO; rated A (high) with a Stable trend by DBRS Morningstar). The contracts expire 12 months after the maturity of the Bonds. For 20 years until November 2031, the IESO pays ProjectCo the difference between a fixed but partially indexed price, which was $144.7/megawatt hour (MWh) for 2021, and the market price received in Ontario.
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 of 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.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/Governance (ESG) 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.
All figures are in Canadian dollars unless otherwise noted.
The principal methodologies are Rating Wind Power Projects (August 18, 2021; https://www.dbrsmorningstar.com/research/383183) and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (April 4, 2022; https://www.dbrsmorningstar.com/research/394683), 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 firstname.lastname@example.org.
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.
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