Fitch Ratings has upgraded
The Outlook is Negative.
The ratings on the medium-term note programme and outstanding senior unsecured debt have also been upgraded to 'A-' from 'BBB+', while the ratings on the senior perpetual capital securities have been upgraded to 'BBB+' from 'BBB'.
PCCC's upgrade reflects the application of Fitch's updated Government-Related Entities (GRE) Rating Criteria, published on
The Negative Outlook reflects Fitch's Negative Outlook on
Key Rating Drivers
'Strong' State Decision-Making, Oversight: We assess the government's decision-making and oversight over PCCC as 'Strong', because the central State-owned
'Strong' Precedent of Support: PCCC has received substantial and consistent tangible support from the state in the form of capital injections and subsidies. PCCC benefits from consistent financing provided by policy banks and state-owned banks to support its growth in
'Strong' Preservation of Government Policy Role: The company plays a key role in the planning of clean-energy power projects and the process of green transition in
'Strong' Contagion Risk: The company is an active domestic bond issuer and a high-profile Chinese state-owned E&C firm internationally. A default would have a significant effect on funding for other state-owned enterprises.
Strong Growth Driven by New-Energy Projects: PCCC maintains its leading market position in the clean-energy power E&C segment, including wind power, solar power and pumped storage power stations. It achieved 12% growth in new contracts in 2022 to
SCP Constrained by Leverage: PCCC's SCP of 'b+' is supported by its strong business profile, with a leading market position in
Derivation Summary
We notch PCCC's
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade
The Outlook will be revised to Stable if our Outlook on the sovereign is revised to Stable
Factors that could, individually or collectively, lead to negative rating action/downgrade
Negative rating action on the Chinese sovereign.
Weakening of the likelihood of support from the Chinese government.
Material deterioration in PCCC's business profile, including loss of leading market position, and significant reduction in the new contract and contract backlog
Material deterioration in PCCC's financial profile, including consolidated EBITDA interest coverage below 1.5x (2022: 2.3x) and/or sustained deterioration in financial leverage
For the sovereign rating of
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Public Finances: A continued upward trajectory in general government debt/GDP from persistently high fiscal deficits or a rise in the probability of the materialisation of contingent liabilities, for instance from LGFVs or the financial sector, such that government debt levels compare less favourably with rated peers.
Macro: Reduced confidence in medium-term growth prospects
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Public Finances: Faster deficit reduction consistent with a stabilisation of the general government debt ratio in the medium term, for instance through a stronger and sustained recovery in underlying growth or fiscal reforms which structurally improve local government finances.
Macro: Stronger medium-term growth prospects, which bring per capita GDP more closely in line with rating peers and increases
Structural Features: A material reduction in macro-financial risks and associated contingent liabilities facing the sovereign, for example by maintaining credit growth below nominal GDP growth over a multi-year period, which would cause the removal of the -1 QO notch on structural features.
Liquidity and Debt Structure
Sufficient Liquidity: PCCC had
Issuer Profile
PCCC is a wholly state-owned integrated E&C company that provides planning design, engineering construction, equipment manufacturing and operation management services in the fields of hydraulic and hydropower, thermal power, new energy and infrastructure. PCCC's business also extends into real estate, investment and finance.
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
PCCC is rated two notches below
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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