DBRS Confirms Rating of Comber Wind Financial Corporation at BBB, Stable

DBRS Limited (DBRS) has today confirmed its rating of BBB with a Stable trend on the $450 million Series 1 Senior Secured Bonds (the Bonds), due November 15, 2030, of Comber Wind Financial Corporation (the Issuer). The Issuer is the financing vehicle of Comber Wind Limited Partnership (ProjectCo), a special-purpose entity that owns the 82.8-megawatt (MW) Comber East and the adjacent 82.8-MW Comber West wind projects (together, the Project) located in Essex County, Ontario. As at December 31, 2015, $400.052 million of bonds were outstanding.

The Project commenced commercial operations in November 2011 and has performed well, relative to the rating case, since the start of commercial operations, generating 107%, 113% and 112% of the long-term average annual P90 power production forecast of 438 gigawatt hours (GWh) in 2015, 2014 and 2013, respectively. The debt service coverage ratio performance of ProjectCo has been above the forecast average at 1.53 times (x) for 2015, 1.63x for 2014 and 1.65x for 2013.

ProjectCo benefits from fully contracted power prices at attractive rates under two Feed-In-Tariff contracts (for Comber East and Comber West) with the Independent Electricity System Operation (IESO; rated A (high) with a Stable trend by DBRS). The contract expires 12 months after the maturity of the Bonds. For 20 years until November 2031, the IESO pays to ProjectCo the difference between a fixed but partially indexed price, currently $141.56 per megawatt hour (MWh), and the market price received in Ontario. The rating case forecast assumes modest curtailment, with net production forecast at 434 GWh until 2027 (when the cap is reached). A modest cost for negative HOEP (Hourly Ontario Energy Price) is also assumed in the rating case. If wholesale electricity prices are negative, ProjectCo is not protected, which would reduce the effective price received.

Since the previous rating report, DBRS’s projections for operations and maintenance (O&M) costs have not changed. 2015 represents the second full year after the expiry of support from Siemens, in which Brookfield Power Services Inc. (an affiliate of the sponsor) is the project operator. For wind projects, typical operating and routine maintenance costs range from $10 to $15 per MWh, or 10% to 20% of project revenue. DBRS notes that the Project’s average actual O&M spend for the three years 2013 to 2015 was $8.83/MWh, or 6.3% of revenue, which is below the typical range. Regular O&M costs in 2015 were $1.8 million compared to $2.3 million planned, due to a permanent savings of filters, oil and spare parts, an inventory adjustment and a lower expense recovery. Major maintenance began in 2015 and was $0.4 million compared to $0.9 million planned, due to two major maintenance projects being partially deferred into 2016 and one project that was cancelled for 2015. The forecast includes a fairly stable annual major maintenance expense totaling $28.7 million to 2030, peaking in 2021 at $3.6 million. A Major Maintenance Reserve Account contains 50% of the projected major maintenance expenditure for a given year. The amount of reserve is adjusted at the beginning of each year for that year’s expected maintenance cost. DBRS will continue to monitor actual O&M and major maintenance spending.

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.

The applicable methodology is Rating Wind Power Projects, which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.