VESTAS WIND SYSTEMS A/S
Fitch Ratings has assigned a 'BB' rating to
The notes are supported by cash flows from two windfarms,
RATING RATIONALE
The rating for ILAP's portfolio of two windfarms in
The projects' most relevant counterparties are either investment grade or DisCos under regulated PPAs, which benefit from protective regulatory step-in provisions. Together, both farms have a P50 and one- year P90 difference of 13%, indicating moderate wind resource variability, and have performed at around P50 in most years. The windfarms have some curtailment risk, which Fitch expects to persist going forward. Both farms have presented an adequate operating track record and benefit from long-term, fixed-price service and availability agreements with Vestas Chile, guaranteed by
The overall debt structure is flexible, with payment-in-kind (PIK) interest in the first 24 months and a cash sweep in excess of
Under Fitch's rating case, minimum loan life coverage ratio (LLCR) is 1.23x, which is consistent with the assigned rating. In Fitch scenarios, the debt is repaid within its final maturity.
KEY RATING DRIVERS
Robust O&M Agreement Provides Comfort (Operation Risk - Midrange)
Vestas
The SAAs also provide minimum availability guarantees of 97% for both windfarms since 2021 and of 98% for San Juan starting in 2022. The transaction will be exposed to re-contracting risk once the agreement with Totoral expires in 2029, which could lead to increases in costs or lower availability guarantees.
Adequate
Both farms benefit from a resource forecast that considers operating history, with a longer track record considered for the smaller windfarm, Totoral, having started operations on 2010. Both farms have P90/P50 differentials of 13%, indicating moderate wind resource variability. San Juan has a shorter operating track record and has been exposed to wake effect due to the construction of neighboring windfarms.
Although wake effect remains a risk for this plant, losses have been conservatively estimated by the project's independent engineer (IE), included in the resource forecast utilized by Fitch. Both plants are also exposed to some curtailment risk, which is expected to continue as additional renewables incorporate themselves into the system
Exposure to Adverse Market Dynamics (Revenue Risk - Price: Weaker)
Although the majority of revenues (around 90%) are contracted through long-term, inflation-linked, fixed-priced PPAs, price stabilization policies prevalent in
Flexible Structure (Debt Structure - Midrange)
The debt has the possibility of capitalizing interest in the first two years, and it has flexibility on the principal payment obligation until maturity date. Instead of an amortization schedule, there is a cash sweep mechanism in excess of a minimum cash balance, which goes toward prepayment of the notes after the superiority notes have been paid in full. The transaction benefits from an adequate covenant and security package but lacks a debt service reserve account (DSRA).
Financial Profile
Under Fitch's base case, which represents expected financial performance under normal operating conditions, minimum LLCR is 1.36x and the debt is repaid four years before maturity. Fitch's rating case represents a downside scenario and includes stresses on injection node prices, operational expenses, and the tariff stabilization mechanism for regulated PPAs, among other factors. Under Fitch's rating case, minimum LLCR is 1.23x, consistent with the assigned rating, and the debt is repaid three years before maturity.
Breakevens demonstrate that the financial profile should be resilient against a variety of stresses including generation, increasing basis risk between injection and withdrawal node prices, and increasing operating expenses, which supports the current rating level.
PEER GROUP
Fitch considers other wind energy generation projects in the region as peers for this project, such as
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Monetization of
Decoupling costs at or above an annual average of around
Delays in the publication of the tariff decree that will end the regulated PPA price stabilization beyond the end of 2024;
Net energy generation, after curtailment, consistently below 460 GWh in total for both wind farms.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The decoupling costs remain close to zero, yielding a minimum LLCR forecast of around 1.3x;
Ability to timely monetize current and future tariff stabilization receivables.
TRANSACTION SUMMARY
In
On
The transaction consists of the holding company, ILAP, which issued all of the transaction debt and receives upstreamed cash flows in the form of shareholder loan payments from the project companies and guarantors,
FINANCIAL ANALYSIS
Fitch's base case reflects the agency's view of long-term sustainable performance. Fitch's base case assumes P50 generation with an additional production haircut of 3% to account for forecast uncertainty and potential wake losses. Curtailment and availability are assumed at 5% and 96%, respectively for San Juan and 4% and 95% for Totoral.
Spot price projections are assumed at an average of real
We also considered only five additional years of useful life beyond the expiration of the Vestas contracts, for a total of 25 years of useful life for each asset. However, to reflect our view that operating costs may increase after the typical 20-year useful life of a wind asset, Fitch stressed the SAA costs by 5% after year 20 of operation.
Fitch's rating case reflects a reasonably likely combination of uncorrelated stresses that could occur in any given year but which are not expected to persist. The rating case assumes P90 generation and the same generation haircut, curtailment, availability and inflation as the base case. Withdrawal spot prices are assumed at an average of
Under Fitch's base case, minimum LLCR is 1.36x, while under the rating case, this metric erodes to a minimum of 1.23x.
Fitch also ran break-even analyses to evaluate the project's financial resilience to extreme stresses. These analyses indicated, under Fitch's base case conditions, that the project could withstand a maximum increase on the differentials between its withdrawal and injection node prices to an average of
SECURITY
This debt will be principally secured by a first priority security interest in all assets, the material project documents and the project accounts.
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.
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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