Fitch Ratings has assigned a rating of 'AA-' to
EWP will use the net proceeds from the proposed notes to finance or refinance new or existing projects relating to renewable energy and energy efficiency in accordance with the company's Green and Sustainability Bond Framework, which is aligned with the Green Bond Principles 2021, Social Bond Principles 2021 and Sustainability Bond Guidelines 2021 published by the
We equalize EWP's IDR with that of its parent
Key Rating Drivers
'High' Operational Incentive to Provide Support: The level of integration between EWP and
EWP's operations and financials are closely supervised by the Korean government through
'High' Strategic Incentive to Provide Support: We believe EWP is integral to
Large Base-Load Capacity: As of
Tighter Environmental Restrictions: The government's tougher environmental policies are likely to continue to put pressure on EWP's operating performance over the medium term given its large share of coal-fired capacity. Its gross generation has declined in recent years as coal-fired generation is capped during December-March under a government policy to reduce air pollution since 2020. In addition, two power plants (one coal-fired and one oil-powered) were closed in early 2022, reducing capacity by more than 10%.
Higher Capex: Fitch expects EWP's cash flow generation to be under pressure over the next few years as the company is scheduled begin construction on a new LNG power plant in 2022. As such we expect capex to increase and the company to continue to post negative free cash flow over the medium term.
SCP of 'bbb': We assess EWP's Standalone Credit Profile at 'bbb'. Its net leverage improved in 2021 due to improved operating performance, but we expect net leverage to rise gradually over the next two to three years due to higher capex requirements. We expect net debt to EBITDA to rise closer to 5x over the period from 4.0x in 2021
Derivation Summary
Our assessment of EWP's ratings is comparable with that of
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Electricity sale volume to decline by around 10% in 2022 reflecting the closure of the Honam plant and
Capex of
Dividend payment of
RATING SENSITIVITIES
EWP's ratings are equalised with those of
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on
A perceived weakening of incentive for
For
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on the Korean sovereign (AA-/Stable), provided the likelihood of sovereign support remains intact
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on the sovereign.
Weakening in likelihood of sovereign's support for
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: EWP's cash and cash equivalents stood at
Issuer Profile
EWP is one of six power generation companies wholly owned by
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
EWP's IDR is equalized to that of its parent
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
(C) 2022 Electronic News Publishing, source