Hong Kong, September 18, 2018 -- Moody's Investors Service has placed on review for downgrade the Ba3 corporate
family rating (CFR) of GCL New Energy Holdings Limited and the B1 senior
unsecured rating on its USD bond.
RATINGS RATIONALE
"Our review of GCL New Energy's ratings reflects the continued
pressure on its credit profile from the lingering credit weakness of its
parent, GCL-Poly Energy Holdings Limited," says Ivy
Poon, a Moody's Vice President and Senior Analyst.
"On a standalone basis, GCL New Energy's business transformation
strategy of an asset light model through asset disposals would improve
its financial leverage, but uncertainty remains in the lengthy negotiation
process associated with the disposals, against the backdrop of an
evolving policy environment, as well as the structure of disposal
transactions," adds Poon.
GCL Poly issued a profit warning for its 1H 2018 results, which
its reported EBITDA and net operating cash flow fell by around 31%,
because of a drop in average sales prices and sluggish market demand.
Moody's expects that the heightened business volatility arising
from the challenging industry environment will continue to cloud GCL-Poly's
financial performance over the next 12-18 months. In particular,
the recent government policy to curb capacity expansion in solar power
will temper sentiment in the upstream market.
Given the close linkage between GCL New Energy and GCL Poly, a weakening
in the parent's credit profile directly constrains the subsidiary's ratings.
Nevertheless, as mentioned, GCL New Energy has refined its
business focus to an asset light strategy from one which is asset heavy,
in response to the policy changes. If the strategy is executed
as planned, it would reduce the company's financial leverage
through the deconsolidation of debt associated with the disposed projects
and use of sales proceeds to repay debt.
Moody's notes, however, that the lengthy negotiation
process with potential buyers, precarious terms and conditions of
the disposal transactions, as well as recent policy headwinds in
the solar power industry could cast uncertainty over the execution of
asset light strategy. Moreover, aggressive asset sales could
result in an evolving business model.
In the absence of major asset sales and capital expenditure, Moody's
expects that GCL New Energy's projected metrics will stay within
its ratings tolerance levels and continue to position the company's
credit profile at the single-B rating level.
GCL New Energy's liquidity profile remains weak, highlighted
by a heavy reliance on external financing, and the prolonged collection
of government subsidies on new projects. Nevertheless, Moody's
expects that the government subsidy associated with the seventh batch
of renewable energy will be distributed in the fourth quarter of 2018
and could provide some relief against refinancing pressure.
Moody's ratings review period will focus on: (1) the implementation
of GCL New Energy's asset light model and the resultant impact on
the company's financial leverage, as well as its business
model, (2) the receipt of subsidies for GCL New Energy's seventh
batch of renewable energy, and (3) GCL New Energy's liquidity.
The review will also take into account any further parental constraint
from GCL-Poly as well as the contagion risk between GCL-Poly
and GCL New Energy.
The principal methodology used in these ratings was Unregulated Utilities
and Unregulated Power Companies published in May 2017. Please see
the Rating Methodologies page on www.moodys.com for a copy
of this methodology.
GCL New Energy Holdings Limited is a privately owned solar power generation
company in China. The company's installed capacity totaled 7.1GW
in 26 provinces in China and overseas at 30 June 2018.
GCL New Energy was 62.28% owned by GCL-Poly Energy
Holdings Limited at 30 June 2018. GCL New Energy is the sole downstream
platform of its parent company.
Founded in 1996, GCL-Poly Energy Holdings Limited is an integrated
solar photovoltaic company.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings 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 for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement 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 to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
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.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
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.
Ivy Poon
Vice President - Senior 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
