Philippine Rating Services Corporation (PhilRatings) has assigned an issue credit rating of PRS Aaa to AC Energy Corporation’s (PSE: ACEN) proposed debut Peso Green Bond issue of up to PhP10.0 billion. The rating has a Stable Outlook.
The bonds are intended to comply with the ASEAN Green Bonds Standards, which require proceeds to be used exclusively to fund eligible green projects. ACEN will regularly provide information on the allocation of the net proceeds until fully allocated.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings. A Stable Outlook, on the other hand, indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months.
The assigned issue rating takes into account the following key considerations: (a) the aggressive expansion of its power generation capacity throughout the region via partnerships with a focus on renewable energy; (b) its conservative capital structure; (c) the significant turnaround upon AC Energy and Infrastructure Corporation’s (ACEIC) acquisition of a controlling stake in ACEN in 2019, with a strong pipeline of projects which will support improving profitability and cash flow generating ability moving forward; (d) the strong support from its ultimate shareholder; and (e) its well-experienced management.
The issue credit rating assigned by PhilRatings is based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments in relation to ACEN and may change the rating at any time, should circumstances warrant a change. The rating assigned is in relation to the ACEN’s capacity to pay the rated bonds only and is not an opinion on the bond’s adherence to the ASEAN Green Bonds Standards or environmental impact.
ACEN is the publicly-listed energy platform of the Ayala Group. ACEN, its subsidiaries, and affiliates manage a diversified portfolio of power generation projects, and engage primarily in power project development and operations across the region. As of June 28, 2022, the Company had a total net attributable capacity of 3,885 MW, of which 87% is renewable.
ACEN’s senior management team is composed of seasoned professionals who have solid experience in their respective fields. President and Chief Executive Officer (CEO) John Eric T. Francia also serves as the Chairman of the Investment Committee of Ayala Corporation (AC).
Since the acquisition of a majority stake by ACEIC, ACEN’s business has seen a significant turnaround, with a plan of building an all-renewables generation portfolio by 2025, strengthening ACEN’s balance sheet, expanding capacity, and taking strides to achieve long-term customer relationships.
The improvement in ACEN’s performance became more evident as ACEN’s revenue from sale of electricity jumped by 60.7%, from PhP16.10 billion in 2019 to PhP25.88 billion in 2021. Net income margin also rose to 29.4% in 2021, from 4.8% in 2019.
In the first three months of 2022 (3M 2022), however, ACEN registered a drop in net income to PhP752.45 million. This was attributed to higher costs of purchased power due to high spot market prices during a major preventive maintenance outage of the South Luzon Thermal Energy Corporation (SLTEC) thermal plant.
ACEN’s capital structure is sound, with leverage at conservative levels despite the capital-intensive nature of operations. As of end-March 2022, debt-to-equity (D/E) ratio stood at 0.4x, indicating more than ample room for additional borrowings as needed, including the proposed issuance.
ACEN is scaling up its renewable energy (RE) platform and existing partnerships with a strong 18,000-MW pipeline of RE projects in the region, in various stages of development. The development of these projects is intended to help ACEN attain its objective of reaching 5,000 MW in attributable RE capacity, which the company says it is confident of reaching before 2025. The geographically diverse projects of ACEN, together with its partnerships and joint ventures with strong local counterparts, are seen to mitigate risks.
Major power assets that are expected to be online by 2023 include the New England Solar Farm in Australia (521 MW), San Marcelino Solar (284 MW), Pagudpud Wind (160 MW) and Masaya Solar in India (336 MW). These power assets are seen to support ACEN’s increasing capacity, further strengthen ACEN’s profitability and cash flow generation, and enable ACEN to meet its targets for 2025.