DBRS Morningstar Confirms AltaLink Investments, L.P.’s Issuer Rating at A (low), Stable Trend

DBRS Limited (DBRS Morningstar) confirmed AltaLink Investments, L.P.’s (AILP) Issuer Rating and Senior Unsecured Bonds rating at A (low). Both trends are Stable. The rating confirmations reflect (1) the strong credit quality of AILP's wholly owned subsidiary, AltaLink, L.P. (ALP or OpCo; rated "A"/R-1 (low) with Stable trends by DBRS Morningstar); and (2) the limited amount of debt held by AILP following its deleveraging efforts. The current ratings factor in AILP's debt being structurally subordinated to the debt issued at OpCo.

DBRS Morningstar notes that ALP’s capital expenditure (capex) projects over the next five years have been largely identified and budgeted. ALP is not expected to require support from AILP in the foreseeable future given the relatively low scale of capex and the projected low growth in electricity demand in Alberta over the next 20 years as forecast by the Alberta Electric System Operator's 2021 Long-Term Outlook. In the absence of identified investment opportunities or other outlets for its free cash flow, DBRS Morningstar expects AILP to pay down its remaining short-term debt in 2023.

AILP's business risk assessment is contingent on ALP, which is AILP's single source of distributions. ALP is a low-risk regulated transmission utility provider in Alberta, and DBRS Morningstar does not expect any material change in ALP's credit profile for the medium term.

AILP's financial metrics remain commensurate with the current rating category. DBRS Morningstar does not expect to take a positive rating action on AILP because its ratings are largely constrained by ALP's ratings. However, the following factors, should they occur, could pressure AILP's ratings: (1) a material increase in consolidated and nonconsolidated leverage; (2) a negative rating action at ALP; or (3) a material change in AILP's business profile (which DBRS Morningstar deems unlikely).

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/416784 (July 4, 2023).

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

DBRS Morningstar applied the following principal methodologies:
-- Global Methodology for Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (September 13, 2022; https://www.dbrsmorningstar.com/research/402616)
-- DBRS Morningstar Global Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (October 26, 2022; https://www.dbrsmorningstar.com/research/404334)

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/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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit 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 credit 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 credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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