Moody’s rates Ontario Power A3

Moody’s Investors Service said it assigned an A3 senior unsecured rating to Ontario Power Generation Inc.’s outstanding medium term notes. The outlook is stable. This is the first time that Moody’s has rated Ontario Power.

“Ontario Power Generation’s A3 rating reflects the predictable cash flow and diversification benefits derived from its regulated, contracted nuclear and hydroelectric generation fleet. Moody’s analysis also considers the close relationship of OPG with the province of Ontario and the high probability of extraordinary support from the province,” said Gavin MacFarlane, a Moody’s vice president and senior credit officer, in a press release. The province owns Ontario Power.

Offsetting these credit strengths, there are availability risks across its fleet of generation assets and some hydrology risk. While small, Ontario Power’s merchant generation segment is growing after several 100% debt-financed acquisitions and the potential remains for more debt financed merger and acquisition activity. The company is also pursuing a C$12.8 billion nuclear refurbishment project across four units at its Darlington nuclear generation station that carries a very high level of execution risk, Moody’s said.

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