S&P affirms DTEK Renewables rating at B-, Stable outlook

S&P Global Ratings affirmed the credit rating of
DTEK Renewables at B- with a Stable outlook, the agency reported on Apr. 17. It
acknowledges risks for a green energy rates revision in Ukraine,
the recent announcement of debt restructuring talks by sister
company DTEK Energy (DTEKUA), as well as worsened
payment discipline on the Ukrainian energy market, still expecting that DTEK
Renewables will maintain its sufficient liquidity and will go on with its new
projects. S&P expects the company to demonstrate FFO-to-debt of above 12%
and debt-to-EBITDA close to 4x from 2020. The agency also expects DTEK
Renewables will “refrain from any large-scale dividends or loans to related
parties.”

The agency will lower the DTEK Renewables rating in
case green tariffs will be lowered more than the draft legislation assumes, in
case the credit quality of parent DTEK B.V. worsens, or the company faces
significant liquidity issues due to a delay in payments on the energy market or
a need to support financially the parent group. The company’s rating could be
upgraded in case its FFO-to-debt ratio improves above 20% and debt to EBITDA
falls materially below 4.0x.

Alexander Paraschiy: Taking into
account the increasing share of renewable energy in Ukraine’s electricity
balance (3.7% of total power generated in January 2020, up from 1.3% a year
before), the pressure of high renewable electricity prices is becoming
significant for the market. For that reason, a downward revision of green power
rates looks unavoidable, and the size of the revision is hard to estimate right
now.

We see a risk that the revision will be deeper in the
mid-term as compared to what the government is trying to implement now. So we
see mid-term risks for companies like DTEK Renewables as high. In our view,
S&P was too generous with DTEK Renewables to keep its rating outlook
Stable.