Hanoi, 31 July 2023

FiinRatings is pleased to announce that it has assigned a first-time Long-Term Issuer Credit Rating of “A-” for Gia Lai Electricity Joint Stock Company (“GEG” or “the Company”) with a “Stable” rating outlook. FiinRatings' opinion reflects our assessment of the Company's “Strong” business risk profile and “Intermediate” financial risk profile.

The “Stable” rating outlook reflects FiinRatings' opinion on GEG’s current rating continuance for the next 24 months. As the electricity demand growth has been stable in Vietnam, we expect GEG to be able to maintain its operating efficiency, in addition to having its revenue significantly boosted by the newly operating Tan Phu Dong 1 plant’s 100 MW wind turbines in Tien Giang province in Q3 2023. Additionally, FiinRatings anticipates that the Company will maintain its appropriate financial policies and risk appetite, as demonstrated by the consistent focus on renewable energy as well as the proper use of leverage even during the Company’s expansion period.

Upgrade Scenario:

• The Company's cash flow, which is primarily driven by the significant contribution from key projects, notably Tan Phu Dong 1 wind-power project and 100 MW rooftop solar projects in the 2023-2025 period, exceeds FiinRatings' base case projection.
• The level of financial risk is substantially minimized and consistently maintained, evident from the improved debt-to-equity ratio and interest coverage ratio compared to the 2022 levels of 1.8 times and 2.6 times, respectively.

Downgrade Scenario:

• GEG’s cash flow generated by Tan Phu Dong 1 wind-power plant falls below projection, primarily due to its lower load factors and/or lower electricity price compared to the temporary level.
• Macroeconomic changes lead to significantly higher costs of funding.
• GEG’s leverage and repayment pressure increase substantially, indicated by the Company’s debt-to-equity ratio’s significant increase (beyond the 2.3 times threshold). The higher level of debt comes from the Company’s demand for new investments in obscure projects, which face regulatory issues and/or are yet to have a pricing mechanism, preventing the Company from generating cash inflow.

Read the full rating announcement HERE

Notice: Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. FiinRatings’ opinions, analyses, and rating acknowledgment decisions are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security.

About FiinRatings

FiinRatings Joint Stock Company, a member of FiinGroup and a technical collaboration partner with S&P Global Ratings, is a local licensed Credit Rating Agency in Vietnam. FiinRatings provides credit ratings and related services to issuers, creditors and investors in Vietnam credit market. FiinRatings is also Vietnam first green bonds approved verifier, in accordance with the green bond international standard by the Climate Bonds Initiative. For more information, please visit https://www.fiinratings.vn.

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