China Longyuan Power Group Corp. Ltd.

Overview Key strengths Key risks Largest wind farm operator in China with solid project execution record; capacity to further expand with parent's asset injections. Growing debt burden from elevated capital expenditure (capex) on renewable projects. Persistently low funding costs support financial metrics. Increasing market trading undermines profitability and adds to earnings volatility. Diversified project locations help sustain satisfactory utilization hours. Large outstanding amount of renewable subsidies impede cash flow. We forecast Longyuan's ratio of funds from operations (FFO) to debt will fall slightly to 11%-13% in 2024-2026 from 15.2% in 2023, due to elevated capex and declining profitability. But the company's credit metrics should remain commensurate with current ratings, thanks to its strong financing capability with low funding cost. Its

...Longyuan's credit metrics are anchored by persistently low funding costs. We forecast Longyuan's ratio of funds from operations (FFO) to debt will fall slightly to 11%-13% in 2024-2026 from 15.2% in 2023, due to elevated capex and declining profitability. But the company's credit metrics should remain commensurate with current ratings, thanks to its strong financing capability with low funding cost. Its FFO cash interest coverage will stay comfortably at around 5x in the next two to three years, versus the 2.0x downside threshold. We expect Longyuan will maintain its low refinancing cost at 3% over 2024-2026 in domestic market, underpinned by Chinese government's supportive policies on clean energy investments. The company has strong access to onshore banks and capital markets given its state-owned...

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