DBRS Confirms Plenary Properties LTAP LP Long-Term Senior Bonds at “A,” Stable

DBRS Limited (DBRS) has today confirmed the “A” rating and Stable trend on the Long-Term Senior Bonds of Plenary Properties LTAP LP (ProjectCo), the special-purpose entity created to design, build, finance, maintain and provide information technology (IT) and lifecycle services to the Communications Security Establishment Canada (CSEC) Long-Term Accommodation Project (LTAP). The project is governed by a 33.5-year Project Agreement (PA) signed between ProjectCo and the Government of Canada (the Crown; rated AAA, Stable), as represented by Defence Construction Canada (1951) Ltd. The new facility (the LTAP facility) substantially consolidated services previously furnished at several separate locations by CSEC, Canada’s foreign intelligence and national cryptologic agency. Following service commencement on August 1, 2014, the outstanding Short Term Senior Bonds in the amount of $167.5 million were repaid in full on the expected redemption date of August 18, 2014, from the proceeds of the service commencement payment.

Construction work was completed and the project reached substantial completion on July 31, 2014, by the design-build contractor, PCL Constructors Canada Inc. (DB Contractor), a subsidiary of PCL Construction Group Inc. (PCL). Following substantial completion, the LTAP was occupied in accordance with the planned occupancy schedule. Outstanding minor deficiencies work is estimated at $50,000 to $100,000 and includes millwork and other minor and sundry items, including interior and exterior finishing. The minor deficiencies work is primarily related to the upgrade of the Mid-Term Accommodation Project (MTAP) facility that was not in the initial construction scope and was addressed by way of a change order. The upgrades to the MTAP facility are not expected to give rise to larger operating and lifecycle requirements in the FM services period. Final completion is expected to be achieved in the second quarter of 2016.

The achievement of substantial completion on July 30, 2014, marked the beginning of the 30-year service phase, during which Honeywell Limited (Honeywell or the FM Service Provider) performs all facilities management (FM) services, as well as lifecycle services on behalf of ProjectCo in order to return the facility to a state of good repair upon expiry of the Project Agreement (PA). Key service responsibilities include customary routine and lifecycle maintenance, as well as fairly comprehensive IT and security services.

Ancillary services, such as help desk, energy consumption management and food services, are also part of the scope of services. To date, total service failure deductions are in the amount of $131,000, as a result of service penalties related to minor FM and IT deficiencies. DBRS views the deduction levels as fairly moderate and manageable for a project of this size and type. ProjectCo continues to monitor the progress in the operations period with little expectation of major service issues or problems. The actual and projected financial metrics for the service phase remain consistent with the financial model and adequate for the rating.

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 (September 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.