DBRS Morningstar Confirms AltaLink Investments, L.P. at BBB (high) With a Stable Trend.
ENPNewswire-July 21, 2021--DBRS Morningstar Confirms AltaLink Investments, L.P. at BBB (high) With a Stable Trend
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Release date- 20072021 - DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and the Senior Unsecured Bonds rating of AltaLink Investments, L.P. (AILP) at BBB (high).
Both trends are Stable. The rating confirmation is supported by the strong credit quality of AILP's wholly owned subsidiary, AltaLink, L.P. (ALP or OpCo; rated 'A'/R-1 (low) with Stable trends by DBRS Morningstar). Over the past few years, AILP has used the strength of increasing dividend cash flow from ALP to significantly decrease its nonconsolidated leverage, which currently stands at approximately 9.5%, a slight reduction from 10.9% as at Q1 2020 and 18.6% as at the same period in 2019. The decreasing leverage, along with ALP's self-sufficient cash generation ability following an extended capital investment program, formed the basis of DBRS Morningstar's positive rating actions in July 2019, while the expectation that AILP would gradually ramp down its deleveraging program and use cash for targeted investment programs formed the basis of the trend change to Stable in 2020. In the absence of identified opportunities, however, DBRS Morningstar expects AILP to retire long-term debt as it matures.
ALP's strengthened cash dividends to AILP flow from the Alberta Electric System Operator (AESO)-directed investments from 2011 to 2015, which resulted in a greatly expanded rate base and a favourable increase in allowed return on equity (ROE) from the Alberta Utilities Commission (AUC) beginning in 2017, which has been extended on a rolling basis during the pandemic. ALP significantly increased the flow of its excess cash to AILP starting in 2018. Over the course of 2019 and 2020, AILP used distributions to pay down $400 million of maturing long-term debt and fund dividend distributions to its parent.
ALP is not expected to require support from AILP in the near future given the low scale of capex and the projected low growth in electricity demand in Alberta over the next 20 years as forecasted by the AESO in its 2021 Long-term Outlook (LTO). DBRS Morningstar notes that ALP's capex projects over the next five years have been largely identified and budgeted while the 2021 tariff refund is expected to be funded through a temporary reduction in dividends streamed to AILP as well as debt issued at the ALP level to...
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