Fitch Gives Positive Outlook for Mong Duong 2 of Vietnam

Diep Nguyen

15:34 28/11/2019

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All projects are on stable outlook except for Mong Duong 2 where our Outlook is Positive, linked to the Vietnam sovereign (BB/Positive) due to a government guarantee.

Fitch Gives Positive Outlook for Mong Duong 2 of Vietnam

Photo: HostelWorld

Fitch Ratings’ sector outlook reflects our expectation of strong electricity demand. We see coal remaining the cheapest source of power generation and to continue to dominate the power mix as base load in the near term across Asia-Pacific (APAC). 
Fitch believe the near-term capacity additions from renewables may be hampered by a withdrawal of favourable policies in some of the more advanced markets. However, renewables’ share in generation capacity continues to grow as costs keep falling and governments are committed to decarbonisation.
All projects are on stable outlook except for Mong Duong 2 where our Outlook is Positive, linked to the Vietnam sovereign (BB/Positive) due to a government guarantee. Indonesia-based projects are immune from demand risks due to long-term ‘take-or-pay’ power purchase agreements (PPAs) with PLN (BBB/Stable). 
Two Indian renewable issuers benefit from counterparty diversity. The Indian stapled pool of transmission assets receives availability-based revenue, with off-take risk being systemic and the rating capped by India’s ‘BBB’ Country Ceiling.
The two Indonesian issuers are of investment-grade while Mong Duong 2’s underlying investment-grade credit profile is capped. The transmission assets issuer and one of the three renewable issuers are also rated investment grade. 
These ratings are supported mainly by their robust financial profiles, supportive revenue frameworks and strong debt structure. The other two renewable issuers, Star Energy and Azure RG2, are rated ‘BB-’ and ‘BB’, respectively, driven by higher operation risk for the former and looser debt features for the latter.

DIEP NGUYEN

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