Hong Kong, July 20, 2020 -- Moody's Investors Service, ("Moody's") has
confirmed Zheneng Jinjiang Environment Holding Co Ltd's (ZJE) Ba3
corporate family rating (CFR) and the B1 senior unsecured debt rating
on its US dollar notes due in July 2020.
The outlook has been changed to negative from ratings under review.
This rating action concludes the review for downgrade on the ratings of
ZJE that was initiated on 28 May 2020.
RATINGS RATIONALE
"The ratings confirmation reflects our expectation that ZJE's immediate
refinancing pressure will be substantially reduced after it has secured
a term loan facility of around USD270 million for repaying the USD200
million USD bond maturing on 27 July 2020," says Ralph Ng,
a Moody's Assistant Vice President and Analyst.
"Nonetheless, the negative outlook reflects ongoing uncertainties
over its refinancing of upcoming maturities, in particular the syndicated
loan of USD200 million, which is due in June 2021, given the
company's weak liquidity position over the next 12-18 months
," adds Ng.
On 15 July 2020, ZJE announced that it has secured a 3-year
term loan facility of up to USD270 million, including USD207.9
million available immediately and increased limit of no more than USD62.1
million. Subject to certain conditions precedent, including
filing with the National Development and Reform Commission, the
loan proceeds will be used for general corporate purposes, including
mainly to refinance the USD200 million bond and any existing indebtedness
of the company.
Moody's expects that, as a minority owned but consolidated
subsidiary of Zhejiang Provincial Energy Group Co. Ltd (ZEG,
A2 stable), ZJE will continue to benefit from financial and operational
supports from the state-owned shareholder, such as greater
access to credit markets and lower financing costs, as reflected
in the terms under the new term loan facility.
The negative ratings outlook takes into account Moody's expectation
that over the next 12-18 months, ZJE will continue to face
repayment pressures, in particular from the syndicated loan of USD200
million, in the absence of any support from ZEG.
For 2020-2021, Moody's expects that ZJE's average annual
capital spending will register around RMB2 billion, with adjusted
funds from operations (FFO) to debt of around 10%-11%,
and FFO interest coverage of about 3.0x.
The senior unsecured debt rating is one notch lower than the CFR due to
subordination risk.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered the company's focus on waste-to-energy,
as well as its business strategy, financial policy, regulatory
risk and corporate governance structure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
ZJE's outlook can return to stable if the repayment pressure from
its upcoming maturities is substantially reduced and ZJE's liquidity
position improves materially. ZJE's higher strategic importance
to ZEG and stronger evidence of provision of support from ZEG will also
support a stable outlook.
ZJE's ratings will be under downward pressure if (1) ZJE's liquidity
position does not stabilize or if it pursues further debt-funded
expansions or overseas projects that weaken its financial and business
profile; (2) there are changes in China's regulatory environment
that adversely affect the company's profitability.
Financial metrics for a ratings downgrade include RCF to debt remaining
below 8%, and FFO interest cover below 2.25x over
a prolonged period.
The principal methodology used in these ratings was Unregulated Utilities
and Unregulated Power Companies published in May 2017 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066389.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Zheneng Jinjiang Environment Holding Co Ltd is a Singapore-listed
waste-to-energy (WTE) operator in China. Zhejiang
Provincial Energy Group, via its subsidiaries, is ZJE's
single largest shareholder, owning 29.57% of the company
as of the end of June 2020.
ZJE operates along the whole value chain in the WTE sector, from
planning and construction to the operation and management of WTE facilities.
As at the end of 2019, ZJE had 21 operating WTE facilities and four
operating resource recycling projects, with a total waste treatment
capacity of 30,380 tons/day and electricity generation capacity
of 632MW, covering 13 provinces in China.
The local market analyst for these ratings is Qingqing Guo, +86
(212) 057-4093.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
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issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
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provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
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and whose ratings may change as a result of this credit rating action,
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to rated entity, Disclosure from rated entity.
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
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for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Ralph Ng
Asst Vice President - Analyst
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
