Standard & Poor's Ratings Services announced that its ratings on Algonquin Power Co. ("APCo") are unaffected by the company's announcement of the 177 MW Chaplin Wind Project in Saskatchewan. The project has no merchant risk, as APCo will sell all energy production under a 25 year power purchase agreement with SaskPower, which is wholly owned by the Province of Saskatchewan. In 2011 Standard & Poor's upgraded Saskatchewan's credit rating to the highest level possible. For the first time in Saskatchewan's history, the credit rating is at the AAA level.
Algonquin's target construction completion for the Chaplin project is December 2016 with an estimated capital cost of $355 million CAD. It is assumed that Algonquin will finance the Chaplin Project with about 50% equity and 50% debt, consistent with its long term target capital structure. Based on this, Standard & Poor's continues to believe that parent Algonquin Power & Utilities Corp. will achieve target ratios of adjusted funds from operations-to debt of 15%-20%, with about 40%-50% of its consolidated cash flows supported by regulated cash flows from its other subsidiary, Liberty Utilities Co.
Standard & Poor's has confirmed what Algonquin and other developers have known for some time - Saskatchewan is ideally suited for utility-scale wind projects having one of the best onshore wind regimes in Canada, a stable and well-developed regulatory system and a utility controlled by the province with the highest credit rating possible. With the addition of the 177 MW Chaplin Project to the Saskatchewan grid in 2016, wind will make up 8.5% of the generation mix in Saskatchewan. However, given Saskatchewan's voracious demand for electricity due to the increase in large mining projects in the province it is expected that new gas-fired baseload generation will bring this figure down closer to 5% post 2016.
Source: (in part) Reuters and S & P release
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