DBRS Confirms Cory Cogeneration Funding Corp. at A (low), Stable Trend

DBRS has today confirmed the rating of the senior secured Project Bonds of Cory Cogeneration Funding Corporation (CCFC or the Issuer) at A (low), with a Stable trend. The Project Bonds are secured by the Cory Cogeneration Station (Cory or the Project), which is owned by a 50/50 joint venture between the respective subsidiaries of Saskatchewan Power Corporation (SaskPower; rated AA with a Stable trend) and ATCO Ltd. (ATCO; rated A (low) with a Stable trend). The rating continues to be supported by a 25-year power purchase agreement (PPA) with SaskPower, which is scheduled to expire after the Project Bonds mature.

SaskPower is obligated, under the PPA, to make capacity payments based on the availability of Cory, regardless of actual production. The PPA also provides for a tolling arrangement where SaskPower, if dispatching the Project, is obligated to supply and pay for the natural gas required to produce electricity. The Project also has a debt service reserve account (DSRA) equal to two and four quarters of debt payments when the debt service coverage ratio (DSCR) falls to 1.4 times (x) and 1.15x, respectively.

CCFC’s rating remains constrained by operating risk, as the Project receives PPA revenues based on plant availability. Coverage could be under pressure when the facility had outages, as was experienced in 2010. For the 12 months ended June 30, 2012, availability remained reasonable at 96.3% and the key financial metric remained reasonable at 1.6x total debt service coverage.

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

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

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