S&P lowers DTEK Renewables rating to CCC+

S&P Global Ratings reported on Dec. 6 that it had
lowered the credit rating of DTEK Renewables (DTEREN) by one notch to CCC+
while keeping the rating’s outlook at Stable. The rating action has been
triggered by S&P concerns that the company “has exhausted its liquidity
cushion” due to massive CapEx related to the on-going construction of the
Tiligul wind farm which left the company with mid-November cash of EUR 18 mln
and EUR 41.7 mln at its debt-service reserve account. In mid-November, the company was discriminated against
by its only customer, state company Guaranteed Buyer, which failed to repay UAH
3 bln (EUR 97 mln, according to S&P estimates) of arrears designated to
DTEK Renewables in mid-November. The rating agency sees “heightened risks for
receivables collection” by the company due to the energy crisis and a conflict
between the Ukrainian president and the company’s beneficiary owner.

S&P estimated that the Tiligul project, worth EUR
578 mln, has been already financed by EUR 311 mln, and it sees that DTEK
Renewables may face a potential liquidity gap of at least EUR 70-100 mln. “The
company currently funds the project with short-term shareholder loans and may
have some flexibility for capex deferrals,” S&P stated, adding that it
could be difficult for it to secure new long-term debt now.

Alexander Paraschiy: Of course,
the delay of the UAH 3.04 bln payment from GarPok (which was almost EUR 102 mln
as of the date of the canceled transaction) is a significant hit for DTEK
Renewables’ potential liquidity. However, thus far, we see no reason to
consider the company’s financial position or liquidity as under risk due to
that failure. First, except cash accounts, the company had EUR 239 mln
equivalent of loans granted to related parties as of end-June (of which about
EUR 73 mln equivalent were loans receivable on demand), which constitute a
significant liquidity cushion and which is unlikely to have been exhausted as
of now. Second, as S&P stated in its report, the company can always count
on support from its related parties, including the related banks, if it really
feels the need to fill its liquidity gap. Third, the UAH 3.04 bln of unpaid
arrears is not something that DTEK Renewables has lost: the debt can be repaid
any time in the near future, e.g. based on court rulings.

Moreover, S&P’s rating action is beneficial for
DTEK Renewables as the company has now more solid arguments to claim that
Guaranteed Buyer’s discriminatory decision has caused losses (including
reputational), as well as demand some compensation for the losses.