Hong Kong, November 21, 2019 -- Moody's Investors Service has placed on review with direction uncertain
Panda Green Energy Group Limited's Caa1 corporate family rating (CFR),
as well as the Caa2 senior unsecured rating on its $350 million
bond due in January 2020 (changed from negative outlook).
The review follows the announcement by Panda Green on 19 November that
it has entered into a subscription agreement with Beijing Energy Holding
Co., Ltd.'s (BEH, A3 stable), whereby
its wholly owned subsidiary Beijing Energy Investment Holding (Hong Kong)
Co., Limited (BEHHK) will subscribe to up to 32% of
Panda Green's shares for HKD1.79 billion (approximately $230
million) in cash. BEHHK and its affiliates will also provide a
RMB8-10 billion credit enhancement guarantee to Panda Green to
reduce the latter's financing costs.
RATINGS RATIONALE
"The rating action reflects our view that if the transaction proceeds
as announced, it will strengthen Panda Green's credit profile
and support its ability to repay the upcoming maturing USD bond,
due on 25 January 2020," says Ada Li, a Moody's
Vice President and Senior Credit Officer.
To the extent that the proposed transaction proceeds as announced,
it will bolster Panda Green's credit profile, as BEH's
materially stronger credit quality will likely facilitate timely funding
for Panda Green and could enhance the company's financial management.
"At the same time, the rating action considers our expectation
that if the transaction does not proceed or is delayed, Panda Green
is very likely to miss payment on its USD bond due in January, given
its weak access to the capital markets following its aggressive debt-funded
expansion in 2017," adds Li.
If the transaction does not go ahead, a high level of uncertainty
will exist around Panda Green's ability to refinance the maturing
USD bond in the absence of committed funding.
The review will focus on the progress of the proposed transaction,
and on any credit enhancement that the BEH group may provide in the future.
The review will also consider BEH's strategy for Panda Green and
any deleveraging plans.
The review will also consider any contingency plan that Panda Green may
develop if the proposed transaction does not proceed as announced.
The transaction, which is expected to be closed by 6 January 2020,
is subject to Panda Green's independent shareholders' approval,
satisfactory legal and financial due diligence, approval by the
Beijing State-Owned Assets Supervision and Administration Commission
(SASAC), consent from Beijing Development and Reform Commission,
and other regulatory clearances.
Upon completion of the transaction BEH will become Panda Green's
single largest shareholder, with a 32% stake in the company.
BEH and Panda Green have not yet commented on their business strategy
post transaction, and no changes to Panda Green's board have
been announced.
Moody's expects Panda Green's financial metrics will remain weak if it
is unable to reduce its financing costs, with FFO to debt likely
to stay around 3% and interest coverage (FFO/interest) likely to
register around 1.5x in 2020.
The senior unsecured debt rating is one notch lower than the CFR,
reflecting subordination risk.
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.
Panda Green Energy Group Limited engages in the development, investment,
operation and management of solar power plants and other renewable energy
projects. At 31 December 2018, the company reported 2.3
gigawatts of gross installed capacity through its subsidiaries,
associates and joint ventures.
Listed on the Hong Kong Stock Exchange, the company's major shareholders,
at of 19 November 2019, were: 1) China Merchants New Energy
Group (CMNE) and parties acting in concert with CMNE (22.75%),
2) Qingdao City Construction Investment (Group) Co. Limited (19.99%),
and 3) China Huarong Asset Management Co., Ltd. (Huarong,
A3 stable, 19.99%).
Beijing Energy Holding Co., Ltd. (BEH) is the largest
power producer and district heating supplier for the Beijing municipality.
The company mainly engages in power generation across China and district
heating in the Beijing municipality, with a total installed capacity
of 22.4 gigawatts (GW) at the end of 2018.
BEH is wholly owned by the Beijing State-owned Capital Operation
and Management Center (BSCOMC, A1 stable), which in turn is
100% owned by the Beijing municipal government and supervised by
the Beijing State-owned Assets Supervision and Administration Commission
(SASAC).
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
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
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.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory Disclosures for each credit rating action under the
ratings tab on the issuer/entity page and for details of Moody's
Policy for Designating Non-Participating Rated Entities.
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.
Ada Li
VP - Senior Credit Officer
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
