Fitch Ratings has affirmed
The Outlook on the IDR is Stable.
The ratings on the medium-term note programme and outstanding senior unsecured debt have also been affirmed at 'BBB+', while the ratings on the senior perpetual capital securities have been affirmed at 'BBB'.
Fitch has notched the
Key Rating Drivers
Strong Ownership and Control: Fitch has assessed PCCC's status, ownership and control as 'Strong' as the SASAC fully owns the company, effectively controls the board and key senior management, and has a strong influence over the group's major strategies and investment decisions.
Moderate Importance, Support Record: We assess the socio-political implications from a PCCC default as 'Moderate', considering its substantial exposure to the competitive new-energy business and non-power E&C businesses. Potential disruption to
Strong Financial Default Implications: Our assessment of the financial implications of a default by PCCC remains 'Strong' despite its moderate social-political implications from a default because the company is an active domestic and overseas debt issuer and creditors regard it as closely associated with the government. A default by PCCC would make funding difficult for other central state-owned entities.
Growing Power Business: PCCC has maintained its leadership in the hydropower E&C segment while it expands in new-energy businesses under the government's drive to modernise
Capex Shifting to New Energies: Fitch expects PCCC to adopt a more prudent attitude towards public-private partnership (PPP) projects, which will slow PPP investment, while accelerating investment in new-energy power operations. The company had total controlled new-energy capacity of 17GW at end-2022 and aims to raise the capacity to 56GW by end-2025. We therefore project the company's total capex will rise modestly to
SCP Constrained by Leverage: PCCC's 'b+' Standalone Credit Profile (SCP) considers its strong business profile counterbalanced by high leverage due to sustained operating and investing cash outflows associated with PPP and new-energy projects. PCCC's consolidated net debt/EBITDA of 10.3x in 2022 was similar to the 10.2x in 2021. We expect the ratio to stay at 10x-11x on sustained negative free cash flow as PCCC still has abundant investment projects in the pipeline in the medium term.
Derivation Summary
PCCC's IDR is notched three levels below
PCCC's support record is assessed as 'Moderate', while
PCCC's closest peer is
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Revenue growth of 7%-9% in 2023-2025
EBITDA margin to stay largely stable at 7.5%-8% in 2023-2025
Capex of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on the Chinese sovereign.
Strengthening likelihood of support from the Chinese government.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on the Chinese sovereign.
Weakening likelihood of support from the Chinese government.
For the sovereign rating of
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Public Finances: A sustained upward trajectory in government debt/GDP or a rise of contingent liabilities, such that debt levels compare less favourably with rated peers.
Macro: The recurrence of abrupt policy shifts that undermine economic performance and keep growth volatility at elevated levels.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
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.
External Finances: Widespread adoption of the Chinese yuan as a reserve currency, as reflected in a substantial increase in the share of yuan-denominated claims in the
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: At end-2022, 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 listed below.
Public Ratings with Credit Linkage to other ratings
PCCC is rated three 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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