SCOPE Ratings affirms its investment grade issuer rating BBB-
with stable outlook on Encavis AG
Hamburg, October 2nd, 2020 - SDAX-listed solar park and wind farm operator Encavis AG (Prime Standard, ISIN: DE0006095003) has been rated again by SCOPE Ratings (SCOPE) in an updated analysis affirming the investment grade issuer rating (BBB-). The outlook for the rating is Stable. The affirmation reflects SCOPE's view on Encavis' protected business model, continuously improving diversification and robust debt protection and liquidity.
SCOPE has affirmed its BBB-/Stable issuer rating on Encavis AG and its financing subsidiary Encavis Finance BV. Concurrently, SCOPE affirmed the long-term ratings for senior unsecured debt at BBB-, and BB for subordinated (hybrid) debt such as the convertible hybrid bond (ISIN: DE000A19NPE8) and for short-term debt at S-2.
The BBB-/Stable issuer rating remains strongly supported by SCOPE's view on Encavis' protected business model. The Company's business profile is bolstered by the prioritised feed-in of generated electricity under availability-based remuneration schemes and risk mitigation through long-term power purchase agreements from a generation portfolio of more than 1.7 GWp from solar and wind power plants across Europe (ESG: credit-positive environmental risk factor). Given the remuneration model for generated electricity and the nature of wind and solar power plants, Encavis' operating performance is broadly unexposed to CoVid-19 related lockdowns (evidenced by the robust EBITDA margin of around 80% for H1 2020).
Cash flow fluctuations instead tend to be impacted by weather effects, an uncertainty which SCOPE expects to be reduced over the next few years with the execution of the Company's "Fast Forward 2025" growth strategy, which earmarks a doubling of capacities by 2025 (3.4 GW in 2025E against 1.8 GW at year-end 2020E). The continued ramp-up of the generation portfolio with portfolio additions in uncorrelated regions, e.g. the two new solar power plants in Spain, will significantly reduce incremental effects from specific generation assets or regions in the overall portfolio.
Based on Encavis' debt maturity profile, sound liquidity measures over the next few years and publicly communicated financial policy, SCOPE believes that the Company will keep debt levels under control as it expands its asset base.
The Outlook is Stable and incorporates SCOPE's expectation that Encavis will keep EBITDA/cash interest coverage above 3.0x into the medium term. SCOPE also believes the Company will continue to acquire renewable energy power plants and increase dividends, leaving free and discretionary cash flows at breakeven. The rating Outlook further assumes that Encavis will provide financial support to a project SPV if needed to prevent reputational damage spreading to the whole Group.
SCOPE's issuer rating gives international financial market participants clear guidance and an independent assessment of the Company's current and medium-term creditworthiness, thus ensuring greater security and transparency.
"The renewed affirmation of the investment grade rating BBB- awarded by the European rating agency SCOPE confirms our consistent financing policy pursued since 2016 with a focus on stable long-term balance sheet ratios", Dr Christoph Husmann, CFO of Encavis AG, welcomed the rating affirmation. "Encavis' excellent credit metrics mirror the very good financial performance of the Group and offers at the same time an increasing range of future financing options to significantly reduced financing costs", Dr Husmann added.
To see the updated issuer report, as well as the rating history including SCOPE's initial public rating on Encavis AG and its debt-issuing subsidiary Encavis Finance BV on March 18, 2019, please click:
Encavis AG (Prime Standard; ISIN: DE0006095003 / WKN: 609500) is a producer of electricity from renewable sources listed on the SDAX of Deutsche Börse AG. As one of the leading independent power generators (IPPs), Encavis acquires and operates solar parks and (onshore) wind farms in ten European countries. The plants for sustainable energy generation generate stable yields through guaranteed feed-in tariffs (FIT) or long-term power purchase agreements (PPA). Within the Encavis Group, Encavis Asset Management AG specializes in the area of institutional investors.
Encavis AG's environmental, social and governance performance has been rated by ISS ESG and MSCI ESG, two of the world's leading ESG research and rating agencies, and received the ISS ESG Prime Label and MSCI Rating A.
Further information on the Company can be found at www.encavis.com
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