Fitch Ratings has assigned
Fitch has also assigned a senior unsecured rating of 'A' to the company.
BEIH is rated one notch down from its 32% parent,
We assess BEH has 'Medium' legal, strategic and operational incentives to support BEIH, which acts as a strategically important renewable-energy investment platform of BEH. It plans to account for around 73% of the group's renewable energy capacity target by end-2025.
Key Rating Drivers
'Medium' Legal Incentive to Provide Support: BEH guaranteed 36% of BEIH's debt issued at offshore and onshore holding companies as of
'Medium' Strategic Incentive to Provide Support: Our factor assessment is underpinned by BEIH's 'Medium' competitive advantage to its parent, which stems from its role in implementing the parent's energy-transition strategy. It targets to contribute 87% of BEH's renewable-energy installation in
BEIH's rapid expansion leads to a 'High' assessment of the growth potential subfactor. However, we believe BEIH makes a 'Low' financial contribution to BEH due to its current small asset scale.
'Medium' Operational Incentive to Provide Support: Our assessment is underpinned by 'Medium' management and brand overlap, with a low weight assigned to 'Low' synergies from daily operations. BEH assigns BEIH's key management, including the chairman, Secretary of
Fast Capacity Expansion: BEIH targets to increase its total solar and wind power capacity to 22 gigawatts (GW) by end-2025, from 4GW at end-2021. Capacity addition was 849 megawatts (MW) in 9M22 and management estimates new capacity of nearly 2GW in 2022. We believe strong growth in renewable energy is positive for BEIH's business profile, as renewable energy has no exposure to fuel-cost fluctuation and has better cash flow predictability than thermal power.
High Utilisation Hours: The utilisation hours of BEIH's solar power projects improved to 722 hours in 1H22, from 708 hours in 1H21, and surpassed the national average by 32 hours. Its wind power capacity recorded 1,308 utilisation hours in 1H22, higher than the national average by 154 hours. This reflects the company's good project location with better wind and solar resources. We expect future projects to have high utilisation hours, as BEIH continues to develop projects at favourable locations and many of its new projects will serve the
High Leverage on Debt-Funded Capex: We expect EBITDA net leverage to exceed 10x in 2022-2025 due to high capex intensity, which keeps free cash flow in negative territory. Nevertheless, we think BEIH has adequate financial flexibility, buoyed by solid access to loans from the parent and bank financing, aided by parental support.
BEIH is exploring financing sources to fund its capacity growth and plans to list an infrastructure securities investment fund by spinning off two project companies with 400MW of solar capacity. It will also issue asset-based securities and commercial paper programmes, with total registration size of
Derivation Summary
BEIH is rated one notch below its parent, BEH, due to 'Medium' legal, strategic and operational incentives for parental support under Fitch's Parent and Subsidiary Linkage Rating Criteria.
Key Assumptions
Installed capacity to reach 22GW by end-2025.
Stable capacity utilisation for existing capacity; we assume new projects will have higher utilisation hours than the national average to reflect their locations in better solar and wind power resource areas.
Stable tariffs at existing wind and solar farms, but decreasing tariff for new capacity due to the removal of subsidies.
Annual capex at around
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Strengthening incentive for BEH to support BEIH
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on BEH
Weakening incentive for BEH to support BEIH
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity Under Strong Parental Support: BEIH had
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