Fitch Affirms EVN’s Long Term Credit Rating at BB, Outlook Positive

Nhat Trung

16:23 17/09/2019

BizLIVE -

EVN's SCP reflects its position as the owner and operator of Vietnam's electricity transmission and distribution network, and its near 58% share of Vietnam's power generation capacity.

Fitch Affirms EVN’s Long Term Credit Rating at BB, Outlook Positive

Photo: HostelWorld

Fitch Ratings has affirmed Vietnam Electricity's (EVN) Long-Term Foreign-Currency Issuer Default Rating at 'BB' with a Positive Outlook. The Outlook reflects the agency's Outlook on Vietnam (BB/Positive), which was revised to Positive from Stable on 9 May 2019. Fitch has also affirmed EVN's senior unsecured rating of 'BB'. EVN's Standalone Credit Profile (SCP) is assessed at 'bb'.
EVN's ratings are equalised with those of the sovereign under Fitch's Government-Related Entities Rating Criteria due to Fitch's assessment of a strong likelihood of state support in light of the group's strategic importance to the power sector in Vietnam. 
EVN's SCP reflects its position as the owner and operator of Vietnam's electricity transmission and distribution network, and its near 58% share of Vietnam's power generation capacity. Fitch expects EVN's financial profile to be much stronger than the one that is commensurate for its SCP assessment. 
However, an upward revision of EVN's standalone profile is contingent on consistent application of electricity regulatory reforms, including a longer record of tariff adjustments that reflect cost changes, while FFO adjusted net leverage is sustained below 5.0x.
KEY RATING DRIVERS
Strong State Linkages: Fitch sees EVN's status, ownership and control by the Vietnam sovereign as 'Very Strong'. The state fully owns EVN, appoints its board and senior management, directs investments and approves tariff hikes in excess of 5%. The support track record and our expectations of state support for EVN are 'Strong' as the company has received guarantees, step-down loans, loans from state-owned banks at preferential rates, subsidies for strategically important projects and tax incentives. Fitch expects support to be available if needed, even though the government intends to lower direct support for state-owned enterprises and contain sovereign debt levels.
Strong State Inventive to Support: Fitch believes the socio-political implications of a potential EVN default are 'Strong' as a default by EVN would lead to service disruption in light of the company's entrenched position across the electricity-sector value chain. It would also be difficult to fund new power investments. 
Fitch sees the financial implications of a potential default by EVN as 'Very Strong' as this would significantly affect the availability and cost of domestic and foreign financing options for the state and government-related entities because EVN is one of Vietnam's key borrowers.
Entrenched Market Position: EVN is a monopoly in Vietnam's electricity transmission and distribution sector. The company owns and operates about 58% of the country's total installed generation capacity, including large strategic hydropower assets, which the government uses to generate electricity, control floods and for irrigation. 
EVN also operates the national power-dispatch system, selling electricity to more than 25 million customers across the country. The group has steadily augmented its generation capacity and cut transmission and distribution losses over the previous few years.
Strong Demand, Solid Collections: Fitch expects electricity demand in Vietnam to continue increasing at an average rate of 9.5% per annum, driven by rising industrialisation, urbanisation and affluence. Vietnam has a solid national electrification ratio of about 99%, with the ratio reaching almost 100% in urban areas. Management has said all electricity consumers are billed regularly and collection rates are between 99% and 100% across EVN's five power-distribution companies.

NHAT TRUNG

Tin liên quan

Cùng dòng sự kiện