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Fitch Ratings: Envision Energy's Revised AESC Investment Plan Will Not Affect Negative Watch.

Hong Kong: Envision Energy International Limited's (BBB-/Rating Watch Negative) revised plan to take an equity stake in Automotive Energy Supply Corporation (AESC) will not affect the Rating Watch Negative that was placed on the rating on 13 August 2018, says Fitch Ratings.

Envision had previously announced plans to disburse loans of about USD180 million to affiliated companies to finance the acquisition of AESC, Nissan Motor Co., Ltd.'s (BBB+/Stable) battery business. Under the latest plan, the China-based company is instead planning to invest about USD180 million for a stake in AESC. The transaction is expected to be completed by March 2019, according to Nissan.

Fitch had placed Envision Energy on Rating Watch Negative to reflect our expectations of a deterioration in the wind-turbine maker's leverage in the medium term based on the planned disbursement of the loans. The loans, if disbursed, would raise the company's 2018 FFO adjusted net leverage to 2.3x and Fitch expects this metric to remain above 1.5x, the level at which we would consider negative rating action, if the new plan is carried out.

The near-term financial impact of the new proposal may be marginally negative as AESC is not yet profitable and Envision Energy will no longer receive fixed-interest income. However, in the longer run, the revised structure may be marginally positive as the company will be able to share any potential upside from the venture. The Rating Watch Negative remains relevant as Envision is likely to breach its downgrade triggers including leverage if the investment takes place.

Even without the potential investment, Envision Energy's leverage has limited headroom because of capex that was higher than Fitch's expectation in 2017, and our slightly lower EBITDA expectations for 2018. The company's FFO adjusted net leverage had reached 2.0x by end-2017, though Fitch currently expects this metric to fall back to around 1.5x in 2019 without the planned investment.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Dec 19, 2018
Words:318
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