Topic:"Debt Service Coverage Ratio" in M12914

1 1.0 INTRODUCTION 2 3 NSP Maritime Link Incorporated (NSPML, Company) makes this Application for 4 approval of an assessment from Nova Scotia Power Incorporated (NS Power) for 5 recovery by NSPML of its 2027 and 2028 revenue requirements....

AI summary NSP Maritime Link Incorporated (NSPML) is seeking approval to recover its 2027 and 2028 revenue requirements, totaling $200.3 million and $191.5 million respectively. The request includes operating and maintenance costs, depreciation, interest, and financing costs, with adjustments to debt and equity financing costs and inflationary impacts. NSPML also proposes an alternate approach for the 2027 marine survey due to its materiality and prudence for customers.

8 TABLE 1 Description (Amounts in $millions) 2026 (approved) 2027 2028 $O\&M^2$ 22.0 27.2 21.6 Depreciation 3 57.2 57.7 58.1 Debt Financing Costs • Interest (Net) 37.8 36.7 35.4 Amortization of Deferred Financing Costs 1.4 1.5 1.4 Equity F...

AI summary Table 1 presents financial data including operating and maintenance costs, depreciation, debt and equity financing costs, and total costs for the years 2026, 2027, and 2028. The data shows variations in these costs across the years.

Date Filed: June 25, 2026 Page 9 of 28 1 The Company has discussed this approach with customer representatives and believes 2 it warrants Board consideration. 3 4 NSPML's rationale for this treatment includes: 5 6  Marine survey costs are...

AI summary NSPML discusses the challenges of managing marine survey costs, including their significance to maintenance and inspection expenses, forecasting uncertainties, and the impact on earnings. A proposed solution involves filing the Contracted Marine Survey cost confidentially after the contract award, with adjustments incorporated into the 2027 assessment.

6 2.4 Debt Financing Costs 7 8 Debt financing costs consist of two components: (i) annual net interest costs and (ii) 9 amortization of deferred financing charges. These debt financing arrangements were 10 reviewed by the NSEB and confirme...

AI summary Debt financing costs include annual net interest costs and amortization of deferred financing charges. These arrangements were reviewed by the NSEB and confirmed as prudent in the Final Costs Decision.

12 2.4.1 Annual Net Interest Costs 13 14 The requested recovery of annual net interest costs in 2027 is $36.7 million. This 15 represents total coupon interest costs of $36.1 million, letter of credit fees of $0.4 16 million, interest on d...

AI summary The document discusses the requested recovery of annual net interest costs for 2027 and 2028, including coupon interest, letter of credit fees, and interest on debt financing, partially offset by interest revenue and disallowed expenses. It also outlines the financing structure for the Maritime Link project, including bond guarantees and repayment schedules.

Date Filed: June 25, 2026 Page 18 of 28 1 associated cost recovery rights. Of note is that, at this time, none of the lenders were 2 willing to extend more than the $35 million set out above. Absent unexpected funding 3 requirements, this...

AI summary The document discusses NSPML's financing situation, noting that lenders are only willing to provide up to $35 million in short-term financing due to security concerns. This amount is not long-term financing and will be subordinate to Canada's $1.8 billion in bonds. The document also mentions the amortization of deferred financing charges, with $1.5 million and $1.4 million included in the revenue requirement for 2027 and 2028, respectively.

15 Key considerations include: 16 17 NSPML's borrowing rates are higher than NS Power's due to the absence of a credit 18 rating and the pledging of all assets under FLG and FLG2. 19 Based on NSPML's understanding of the traditional applic...

AI summary NSPML faces higher borrowing rates due to the absence of a credit rating and asset pledging under FLG and FLG2. Smoothing mechanisms may lead to adverse WACC impacts for customers, and NSPML lacks a balancing mechanism like FAM, complicating debt-to-equity ratio management. NSPML would comply with smoothing if directed by the Board but requests flexibility to adjust DER impacts and revisit the approach if needed.

Based on the information in Attachment 1 from a Tier 1 Canadian national bank[1](#page-28-0) , NSPML's estimated incremental cost of borrowing relative to NS Power under current market conditions is in the range of CORRA + CSA + 170 bps to...

AI summary The document discusses NSPML's estimated incremental borrowing costs relative to NS Power, highlighting structural differences in their credit profiles, including subordination of assets and lower equity cushion. These factors increase NSPML's credit risk and borrowing costs compared to NS Power.

NON-CONFIDENTIAL - c) NSPML is progressing towards a 3-year interval for full scale marine surveys, noting that certain areas have just had cable protection augmented through the submarine cable protection initiative. The timing of each su...

AI summary NSPML is planning to conduct marine surveys every three years, but flexibility may be needed if a multi-year cost smoothing mechanism is implemented. This could lead to timing mismatches between cash flows and revenue recovery, creating regulatory assets or liabilities.

Re: An overview of consideration for financing for NSP Maritime Link Inc. ("NSPML") To whom it may concern, As requested, we are providing an overview for consideration and indicative spread estimate for short-term financing for NSP Mariti...

AI summary The document provides an overview of financing considerations for NSPML, an unrated public utility. It outlines the indicative spread for short-term financing, noting that due to subordination and a highly leveraged capital structure, the spread is higher than for unsubordinated financing. This reflects the risk profile for subordinated lenders.

NSPML Responses to Industrial Group Information Requests 2 determine an alternative path to resolution. 3 4 Claims: 5 There are two outstanding land claims; NSPML is working with external counsel to resolve 6 these. 7 8 In total, the outst...

AI summary NSPML has responded to industrial group information requests regarding land claims, project costs, and credit facilities. The outstanding project costs are expected to be no more than $6 million, and the marine survey cost was treated as an O&M expense. NSPML has committed to a $25 million credit facility and an uncommitted accordion of $10 million, with questions raised about borrowing limits and expansion plans.

- NSPML states two key considerations in the decision about how to finance the marine survey - are the following: - Based on NSPML's understanding of the traditional application of WACC, smoothing is likely to create adverse WACC impacts f...

AI summary NSPML discusses the financing of a marine survey, highlighting concerns about the impact of smoothing and deferring recovery on customers' weighted average cost of capital (WACC). A question is raised about the contradiction between these points and the assumption of funding at different rates. NSPML is also asked to provide its forecasted WACC for 2027 and 2028.

2 From the hypothetical example, the blended debt rate at NSPML remains lower than NS 3 Power's after incorporation of the new debt but the overall cost to customers of the new 4 debt is higher when NSPML borrows the funds. 5 6 This trend...

AI summary The text discusses the blended debt rate at NSPML and compares it to NS Power, noting that while NSPML's rate remains lower, the overall cost to customers increases with new debt. It also highlights how different borrowing mechanisms affect interest rate spreads and mentions the forecasted WACC for NSPML in 2027 and 2028.

23 Request IR-10: - 24 Reference: Section 4.0 Marine Survey Cost Recovery - 25 NSPML states two key considerations in the decision about how to finance the marine survey are 26 the following: - 27 Based on NSPML's understanding of the trad...

AI summary The text discusses NSPML's considerations regarding financing marine survey costs, highlighting potential WACC impacts on customers. It also requests detailed information on vegetation management activities, cost estimates, and the replacement of the SCM system. The discussion raises questions about financial implications and operational impacts.

1 (iii) Please provide the calculations showing a realistic order of 2 magnitude (or range) of this incentive. State the 3 assumptions regarding how much the Contracted Marine 4 Survey costs exceed Placeholder, how long the recovery is 5 d...

AI summary The text requests detailed calculations and assumptions regarding the recovery of Contracted Marine Survey costs, including scenarios involving in-year recovery, smoothing over different time periods, and true-up adjustments. It references WACC impacts and the Placeholder Marine Survey cost as a base case.

12 Reference: Section 4.0, Key Considerations (pp. 21-22). - 13 (a) Please quantify and explain the basis for NSPML's assertions that its 14 borrowing rates "are higher than NS Power's" (bullet 1, p. 21), and "likely 15 at higher rates" (b...

AI summary The text includes questions directed at NSPML regarding its borrowing rates compared to NS Power, the absence of a balancing mechanism similar to NSPI's FAM, and the treatment of marine survey frequency as a settled assumption for planning purposes.

7 Request IR-14: - 8 Reference: Section 2.4.1, Annual Net Interest Costs (pp. 16-17). - 9 Preamble: The Application states that NSPML has committed to a term unsecured 10 revolving credit facility for up to $25 million, in addition to an u...

AI summary The document requests explanations regarding NSPML's credit facility, including the significance of a committed facility and uncommitted accordion, potential waivers to FLGs, steps to expand borrowing capabilities, and expected credit facility usage and interest rates in 2027 and 2028.

Request IR-5: Refer to the Application, Section 4.0 Marine Survey Cost Recovery (In Year Or Smoothed), page 21 of 28, lines 17-24, and page 22 of 28, lines 4-14: - a) Please provide the evidence that supports NSPML's claim that its current...

AI summary Request IR-5 asks Nova Scotia Power Marine Limited (NSPML) to provide evidence regarding its borrowing rates, costs incurred due to debt-to-equity ratios, and estimated compliance costs with smoothing, compared to customer cost increases based on WACC differences.