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DBRS trims Brookfield Renewable Kwagis
DBRS said it downgraded Brookfield Renewable Kwagis Holding Inc.’s issuer rating and series I senior secured bonds to BBB from BBB (high) and changed the trend to stable from negative.
The bonds are guaranteed by the issuer’s project subsidiary, Kwagis Power LP (the Project LP) and are secured by all the assets of the 45-megawatt run-of-river hydroelectric power-generating facility in British Columbia (the Project). The C$175 million of bonds start amortizing in 2024 and fully amortize in 2053 at the end of the electricity purchase agreement between the Project LP and British Columbia Hydro and Power Authority.
“The Project's generation and revenues have generally been lower than originally modeled at financial close. While the Project's performance had rebounded and the generation was slightly higher than projected in 2020 and 2021, performance weakened again in 2022. In 2022, generation and revenue were 22% and 27% below the long-term average generation and revenue targets, respectively. Cumulative generation until the end of 2022 was 13% below and cumulative revenue was 18% below the modeled figures at financial close,” DBRS said in a press release.
“DBRS Morningstar recognizes that hydrological variability for run-of-river projects can be large and that patterns can be statistically significant only over longer periods of time. The next firm energy adjustment anniversary is in 2025. Although not expected in the base-case forecast, DBRS Morningstar notes that if the generation until then is weak, there is a risk of further erosion in the effective energy price that could cause a negative rating action,” the agency added.
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