DBRS Confirms Capital City Link General Partnership Long-Term Senior Bonds at A (low), Stable

DBRS Limited (DBRS) has today confirmed the rating of A (low) with a Stable trend on the Long-Term Senior Bonds (the Senior Bonds) of Capital City Link General Partnership (ProjectCo or the Issuer), a special-purpose entity (SPE) created to design, build, finance, operate and maintain the final 27-kilometre northeast leg of Anthony Henday Drive in Edmonton (the Project) under a 34.5-year Design Build Finance Operate and Maintain Agreement (the DBFO Agreement) with the Government of Alberta (the Province, rated AAA with a Stable trend by DBRS).

All of ProjectCo’s construction-related obligations have been passed down to a design-build joint venture consisting of Flatiron Constructors Canada Limited (Flatiron), Dragados Canada, Inc. (Dragados), Aecon Construction Management Inc. (Aecon) and Lafarge Canada Inc. (Lafarge) (collectively, the DB Contractors). Construction activities, which began in May 2012, are approximately 74% complete as measured by fees earned by the DB Contractors, and Traffic Availability is expected to be met on the scheduled Traffic Availability Date of October 1, 2016, despite the Project encountering earlier delays related to utility relocation. However, schedule delays have largely been mitigated as a result of additional work through the winter months and increased resources. The design, permitting and approval processes are virtually complete and construction activities are generally advancing well, with no material concerns raised by BTY Group, Inc. (the technical advisor or TA). Construction activities currently underway include completing bridge structures, laying granular base course and paving.

The achievement of Traffic Availability in 2016 will mark the beginning of the 30-year service phase, and ProjectCo’s operating and routine maintenance obligations (O&M) during this period have been passed down to Volker Stevin Highways Ltd. (Volker or the Operator). Volker is currently responsible for O&M on approximately 25% of Alberta’s highways and is therefore very familiar with the contractual requirements. Rehabilitation obligations for the new infrastructure have been retained by ProjectCo, and will be supported by a dynamic lifecycle reserving mechanism and ProjectCo’s relatively sound operating resilience, which is expected to be sufficient to absorb a 27% increase in the lifecycle and SPE budget (30% lifecycle alone) or a 40% shock to the O&M budget. The forecast financial metrics remain unchanged from the time of the initial rating assignment.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodology is Rating Public-Private Partnerships (March 2015), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.