DBRS Confirms Mississagi Power Trust at A (low)

DBRS has today confirmed the rating on the $175 million Senior Secured Bonds (the Bonds) of Mississagi Power Trust (MPT or the Company) at A (low) with a Stable trend. The Bonds are secured by the hydroelectric power generation assets (the Project) of MPT. The rating reflects the strength of MPT’s energy sales contracts currently in place and is supported by the Company’s low-cost generating facilities with storage capacity, dispatch flexibility and reliable operating performance, as well as by long-term fundamentals for low-cost hydroelectric power generation in the Ontario wholesale power market.

MPT electric power sales are under a long-term contract guaranteed by Brookfield Renewable Power Inc. (BRPI). In turn, BRPI has a 20-year sale agreement through 2029 to sell power to the Ontario Power Authority (OPA, rated A (high) with a Stable trend), providing support to BRPI’s commitment to purchase power from various projects in Ontario, including MPT.

Given the OPA contract with BRPI that reasonably mitigated MPT’s exposure to wholesale power market prices, hydrology became the primary risk constraining the rating. This risk has become more muted with the strong price support currently in place. Although hydrology and production in the past two years have been below the long-term expected average, EBITDA was sufficient to provide healthy coverage for debt service and capital expenditure requirements, allowing distributions to the parent company. In addition to the robust cash flow performance and debt service coverage ratio, the six-month debt service reserve provides reasonable protection against any potential cash flow shortfall that could occur due to this uncertainty. Refinancing risk is mitigated by the long-life nature of MPT’s hydroelectric generation assets and the sustainable strength in the Project’s economics. Expected long-term average generation (750 GWh per year) and a detailed long-term capital plan and budget are reviewed and approved by the independent engineer (IE) every five years to ensure the long-term energy production, operating efficiency, safety and useful life of the power generation assets. Regulatory risk is limited. The energy environment in Ontario continues to evolve, but is expected to remain favourable for emission-free hydroelectric power producers like MPT.

Note:

The applicable methodology is Rating Project Finance, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.