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Fitch temporarily downgrades DTEK Renewables to 'C' due to redemption of part of bonds
KYIV. Feb 28 (Interfax-Ukraine) – The international rating agency Fitch Ratings has downgraded DTEK Renewables B.V.’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to ‘C’ from ‘CC’ after redemption of part of its eurobonds at a price below the face value following the tender.
“We regard DTEK Renewables’ tender offer for part of its bonds as a DDE, as the tender offer will be executed well below par and is part of a series of measures the company is adopting to reduce the probability of future defaults. However, Fitch deems them as very likely, in light of the issuer experiencing a severe situation of distress, including harsh operational disruptions, limited foreign-currency liquidity held abroad and restrictions on cross-border foreign-currency payments,” the company said.
Following the tender, Ornex Limited (Cyprus), a 100% subsidiary of DTEK Renewables, will buy back eurobonds of the parent company maturing in 2024 with a total par value of EUR 35.471 million for up to EUR 15.833 million, including accrued interest, the buyback price is about 42.2% of the face value.
“The repurchase will leave DTEK Renewables with liquidity in accounts outside Ukraine sufficient only for the upcoming coupon payment in May 2023 of about EUR12 million,” Fitch said.
“DTEK Renewables has so far not been granted an exception to the foreign-exchange (FX) transfer moratorium, without which it cannot transfer cash available in Ukraine abroad to pay its international bondholders,” the agency said.
“We expect to downgrade the IDR to ‘RD’ (restricted default) on completion of the tender offer and simultaneously re-rate the company at ‘CC’ to reflect its post-transaction capital structure,” Fitch said.
“DTEK Renewables is negotiating with its bank creditors to amend the repayment schedule to end-2023. In September 2022, DTEK Renewables used the remaining cash from its debt service reserve account, which has since not been topped up. In November 2022, a project finance subsidiary failed to pay EUR 9 million of the next scheduled payment on its bank debt, although it is not guaranteed by DTEK Renewables,” the report notes.
“DTEK Renewables’ production has been significantly reduced by the war, with energy produced from March 2022 to December 2022 70% lower than year ago, to 521MWh from 1,739MWh. With the exception of Tiligulskaya WPP, its wind farms stopped operations, immediately when the war started due to grid connection disruptions and being located in Russian-occupied territories. A significant majority of solar farms continue to generate electricity but Ukraine’s energy infrastructure has increasingly been targeted by Russian attacks, both the generating assets and the electricity grids,” Fitch said.
Payments from the guaranteed buyer under the feed-in-tariff weakened to 84% in December 2022 after reaching its peak of 93% in November from only about 17% of the amounts due from March to May 2022.
Fitch estimates maintenance costs for DTEK Renewables at around EUR 10 million annually from 2023.