Fitch Ratings has affirmed
Fitch has also affirmed the company's senior unsecured rating of 'A'.
BEIH is rated one notch down from its 32% parent,
Key Rating Drivers
'Medium' Legal Incentive to Support: BEH guaranteed about 33% of BEIH's debt issued by offshore and onshore holding companies at end-2022 (end-2021: 35%). We regard the guarantees' coverage and permanence to be 'Medium', as BEIH may increase external borrowings without parental support as its asset base expands rapidly. Our factor assessment also reflects the large internal loans BEH provided to BEIH's project and onshore holding companies. About 30% of BEIH's borrowings were extended at end-2022 by BEH and its related entities, which also guaranteed some of BEIH's external bank borrowings.
'Medium' Strategic Incentive to Support: BEIH's 'Medium' competitive advantage to its parent is supported by its role in implementing BEH's overall energy-transition strategy and BEH's mandate in improving
Our assessment of the growth potential subfactor is 'High' due to BEIH's rapid expansion. However, we believe BEIH makes a 'Low' financial contribution to BEH as its asset scale still remains small at this juncture.
'Medium' Operational Incentive to 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 the
Renewable Focus Supports Business Profile: BEIH is a pure renewable power-generation company. It has no exposure to fuel-cost fluctuations and high dispatch priority, which leads to better cash flow predictability than for thermal power. Market trading in renewables, which have higher price risk relative to projects with fixed feed-in tariffs, has also increased. We believe the overall price risk is still manageable and could be mitigated by lower equipment costs and potential additional income from the green power market.
High Utilisation Hours: The company's suitable project locations and superior wind and solar resources support BEIH's higher utilisation hours than the national average. Fitch expects utilisation hours to remain high at BEIH as it continues to develop projects at favourable locations. Many of its new projects will serve the
Leverage to Stay Elevated: BEIH targets to more than triple its renewable installation capacity to 22 gigawatts (GW) by end-2025, from 6.8GW at
Continued funding support from the parent and adequate interest coverage could mitigate the high leverage pressure. BEIH's onshore funding costs are still fairly competitive, supported by a favourable financing environment for renewable projects and BEIH's close linkage with BEH. These conditions have also allowed BEIH to expand its funding channels, as evident from its successful launch of panda bonds and an asset-backed securities programme amounting to about
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 28GW by end-2026.
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.
Tariff for wind and solar power trending down on the removal of subsidies and some price discounts from market trading.
Cash capex, excluding value-added tax (VAT), of
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
Liquidity and Debt Structure
Parental Support Drives Liquidity: BEIH had
Issuer Profile
BEIH is a renewable energy subsidiary of BEH that operates across 24 provinces in mainland
Summary of Financial Adjustments
VAT Deduction: Wind and solar farms in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
We rate BEIH one notch below its parent, BEH, based on Fitch's Parent and Subsidiary Linkage Rating Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
(C) 2023 Electronic News Publishing, source