DBRS Confirms Cory Cogeneration Funding Corporation at BBB (high) with Stable Trend

DBRS Limited (DBRS) has today confirmed its rating of BBB (high) on the Senior Secured Project Bonds (the Bonds) of Cory Cogeneration Funding Corporation (the Issuer). The trends remain Stable. These confirmations reflect the continued performance in line with DBRS’s expectations of the Issuer’s only asset, the Cory Cogeneration Station (the Station or the Project). The Station is organized as a joint venture, with financial reporting as Cory Cogeneration Station Joint Venture (Cory JV). The Issuer’s financial performance depends entirely on and is reflected by the performance of Cory JV.

The Power Purchase Agreement (PPA) insulates the Issuer from electricity and fuel price and supply/demand risks. Most of the actual tariff (as opposed to international financial reporting standards (IFRS) recognized) revenue, approximately 83% in 2016, is paid for the Station to be available and to cover fixed costs. The remaining variable component of revenue is paid on the basis of running hours and start-ups of the combustion and steam turbines. The Station operates in a baseload mode and additional dispatch depends on system demand based on instructions provided by Saskatchewan Power Corporation (SaskPower). Although variable, the dispatch regime has shown a steady utilization of the Station. The average debt service coverage ratio (DSCR) in the five-year period between 2011 and 2015 was 1.42 times (x).

The robust DSCR of 1.55x for 2015 is a result of high Station availability and lower operations and maintenance (O&M) costs, both due to no scheduled outages. The DSCR of 1.27x for the first nine- months of 2016 is weak due to scheduled major maintenance outages, leading to less availability revenue and relatively high non-Long Term Parts and Supply Agreement (LTPSA) O&M costs. In addition, in 2016 a one-off payment under the LTPSA caused the DSCR to be low. In 2017, the financial performance is expected to remain weak, with an expected DSCR of close to 1.36x as a result of another scheduled major maintenance outage. In 2018 and beyond, the DSCR is expected to rebound, reflective of stable operational performance. Overall, the Station is meeting its efficiency and availability requirements under the PPA.

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 Project Finance, which can be found on our website under Methodologies.