Hong Kong, May 28, 2020 -- Moody's Investors Service, ("Moody's") has
placed on review for downgrade Zheneng Jinjiang Environment Holding Co
Ltd's Ba3 corporate family rating and the B1 senior unsecured debt
rating on its US dollar notes due in July 2020. The previous outlook
on the company was stable.
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE
OF THE RATINGS
"The review for downgrade reflects our concern over Zheneng Jinjiang's
heightened liquidity and refinancing risk, particularly in relation
to the USD200 million bond maturing July 2020," says Ralph Ng,
a Moody's Assistant Vice President and Analyst.
"The company does not have adequate internal financial resources
to meet the repayment and therefore must rely on refinancing arrangements.
The refinancing work is in progress, however, there is no
committed plan thus far," says Ng.
Zheneng Jinjiang's unaudited 2019 full year results show a significant
71.3% decrease in comprehensive income mainly due to:
(1) losses on disposal of property, plant and equipment following
the upgrade of the group's waste-to-energy facilities;
(2) an impairment allowance of receivables and property, plant and
equipment; and (3) a decrease in revenue and profit contribution
from its energy management contracting and project technical and management
services business segment.
The company's weakened performance may further impair its refinancing
ability amid deteriorating economic conditions in China and the coronavirus
pandemic.
Zheneng Jinjiang may seek support from the Zhejiang Provincial Energy
Group Co. Ltd (Zhejiang Energy, A2 stable) for refinancing
arrangement of upcoming maturities. Zhejiang Energy has become
Zheneng Jinjiang's single largest shareholder since August 2019
and is of much stronger credit profile with strong capability in providing
support. That said, Moody's believes the timely execution
of such support, if any, to resolve Zheneng Jinjiang's
imminent liquidity issue is uncertain.
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.
The senior unsecured debt rating is one notch lower than the CFR due to
subordination risk.
Moody's review will focus on: (1) the company's plan to refinance
its USD200 million bond due July 2020; (2) its liquidity position
and ability to repay or refinance all maturing debt; and (3) any
form of direct financing support from Zhejiang Energy.
The outlook could be stabilized if the company can meet all maturing debt
repayment, maintain a stable liquidity position with its financial
metrics remaining within its current Ba3 rating parameters.
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 November 2019.
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.
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The first name below is the lead rating analyst for this Credit Rating
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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.)
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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.
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China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
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