The international rating agency S&P Global Ratings has placed the "B-" rating of DTEK Renewables with a negative outlook on CreditWatch for a possible downgrade due to a deterioration in the company's liquidity against the background of a low level of settlements under feed-in tariffs.
"We are therefore placing our 'B-' rating on DTEK Renewables on CreditWatch with negative implications. The CreditWatch negative reflects the potential of a downgrade if payments from the guaranteed buyer do not resume, resulting in further liquidity pressure," the agency said on its website.
"Since March 2020, DTEK Renewables, a Ukrainian renewable electricity producer, has only received about 10% of payments for the green tariff from Guaranteed Buyer. We believe that this might lead to a liquidity shortage for DTEK Renewables if payments do not resume in August," it said.
"As of June 2020, DTEK Renewables only has around EUR15 million in fully accessible cash in banks, plus EUR130 million in remaining green bond proceeds (issued in November 2019) and around EUR50 million in DSRA and DSA accounts, which represent restricted cash for bank debt and coupon payments. We understand that the green bond proceeds are technically not restricted and the company could use them for general corporate purposes without any financial penalties, but would lose its green certificate. Still, we note that the company does not plan to use the bond proceeds to fund any liquidity shortfall for as long as possible; instead, it plans to invest it in green projects once the new energy law is in force and payments from Guaranteed Buyer resume," S&P experts stated.
"In November 2019, we had expected the company to commission two solar plants amounting to 220 MW by the end of 2020, and two more with 275 MW capacity by the end of 2021. We now do not expect the company to build any SPPs as projects have been on hold since March, which undercuts future EBITDA growth expectations," they said.
"We would also monitor the company's ability and willingness to use the green bond proceeds to cover any liquidity shortage. We could affirm the rating if the new energy law that regulates FiTs and repayment of outstanding receivables comes into force, and payments by Guaranteed Buyer resume. We aim to resolve the CreditWatch within 60 days or earlier," the experts summarized.