EDC keeps top rating for P7-B bonds

Dec 16, 2019

Energy Development Corp. (EDC) was again given the top credit rating by local debt watcher Philippine Rating Services Corp. (PhilRatings) for its P7-billion outstanding bonds.

In a statement over the weekend, PhilRatings said the energy firm maintained its issue credit rating of “PRS Aaa” for the bonds. It has also been assigned a stable outlook for the rating.

This means EDC is expected to have an “extremely strong” capacity to meet its financial commitments, and that the credit rating will hold until the next 12 months.

EDC’s P7-billion outstanding bonds is composed of P3-billion retail bonds scheduled to mature in May 2020 and P4-billion retail bonds due on May 3, 2023.

“The assigned issue credit rating and outlook reflect the following key considerations: (i) leading position as a renewable energy company, both domestically and globally; (ii) strong parent company support and highly-experienced management team; (iii) adequate cash flows to cover debt payments; (iv) conservative capital structure, with a well-managed foreign currency exposure; and (v) a supportive economic and regulatory environment,” PhilRatings said.

The debt watcher noted EDC’s standing as the largest vertically integrated geothermal developer in the world and as a leading renewable energy firm with footprint across geothermal, wind, hydroelectric and solar energy.

It said the company has an installed capacity of 1,473.3 megawatts (MW) and a combined geothermal capacity of 1,179.3 MW as of end-September, making it a leading player in the energy sector.

“From 2017 to end-September 2019, EDC consistently posted positive operating cash flows and net cash flow levels. The company’s current ratio and debt service coverage ratio (DSCR) also remained above 1.0x throughout the period,” PhilRatings said.

It added cash flows of the firm is expected to keep growing until 2021 and its liquidity and debt servicing capacity to be kept at bay.

“With the Philippine Gross Domestic Product (GDP) expected to grow at around 6% in 2019, power demand is anticipated to follow the same trajectory, thus pointing to a positive outlook for the country’s power industry,” the debt watcher said.

EDC is a subsidiary of Lopez-led First Gen Corp. and contributed $67 million (up 28.8% year-on-year) to its earnings in the nine months to September. Attributable net income of First Gen expanded 45.9% to $220.3 million during the nine-month period.

Shares in First Gen at the stock exchange climbed 0.95 points or 3.88% to P25.45 apiece on Friday. EDC delisted from the local bourse last year.