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SCOPE affirms Encavis AG’s investment grade issuer rating ‘BBB-‘, and the Outlook remains ‘Positive’

Hamburg, 27 July 2023 – The Hamburg-based wind and solar park operator Encavis AG (Prime Standard; ISIN: DE0006095003, ticker symbol: ECV), listed on the MDAX of Deutsche Börse AG, and its financing subsidiary Encavis Finance BV have been rated again by the European rating agency SCOPE Ratings (SCOPE) affirming the investment grade issuer rating BBB-. The Outlook remains Positive. Concurrently, SCOPE has affirmed the ratings for senior unsecured debt at BBB-, subordinated (hybrid) debt at BB and short-term debt at S-2. This reflects Encavis’ sustained robust liquidity and its diversified exposure to external funding channels, i.e., from banks and capital markets at project level and from private sources (i.e., shareholder loans and Schuldschein debt) and public sources at Group level.

“SCOPE’s renewed rating action reflects our solid business model, our profound risk management activities and our consistent financing policy, which we have pursued since 2016 with a clear focus on stable long-term balance sheet ratios. Based on that the Accelerated Growth Strategy 2027 will have an overall neutral impact on our business risk profile, and we will maintain our moderate credit metrics”, welcomes Dr Christoph Husmann, Spokesman of the Management Board and CFO of Encavis AG, the remaining ‘Positive’ Outlook.

SCOPE states in its rating report that Encavis ‘BBB-‘ rating primarily reflects the Company’s largely protected position as an independent power producer (IPP) with own power generation portfolio that comprises more than 2.1 gigawatts (GW) across more than 200 renewable power plants. This is supplemented by about 1.4 GW in around 100 plants operated as part of its asset management for third parties across Western Europe (ESG factor: credit-positive environmental risk factor).

The European energy crisis accelerated the expansion of Renewable Energy. European governments plan to reduce their dependence on Russian fossil fuels and fast forward the green transition. The private sector is likely to keep increasing its demand for renewable power, driving up power purchase agreements (PPAs). This trend is also supported by the phasing-out of subsidies for renewable power generation and high power prices compared to pre-crisis levels. High power prices are likely more than offset the combined effect on profitability of new projects stemming from high inflation and increased interest rates.

SCOPE has the opinion that the decreasing share of subsidised projects will likely be compensated by growing outreach and improving granularity of Encavis’ own portfolio. Encavis should be able to retain high profitability, e.g., a SCOPE-adjusted EBITDA margin of above 60% despite some dilution driven by strong growth in lower margin photovoltaic services.

Liquidity ratios are expected to stand comfortably at above 110% in the foreseeable future, supported by a large unrestricted cash cushion of EUR 408m at end of March 2023 and committed undrawn long-term credit lines of EUR 146m. SCOPE assumes that the amortisation of loans at project level (EUR 120m-130m yearly) can be sufficiently covered by the operating cash flow of the project companies.

SCOPE maintains its neutral view of Encavis’ financial policy, which should help the Company to keep growing while maintaining the quality of its financial risk profile. Encavis’ healthy financial policy is evidenced by funding measures, such as the use of equity-like financing instruments, the flexible dividend policy going forward (as Encavis waived the dividend in 2023 for financial year 2022 to support its ambitious growth targets), the wide use of financial covenants, cash reserves at project level and a minimum equity ratio of 24% (30.7% on 31^st March 2023).

The ‘Positive’ Outlook reflects SCOPE’s expectation that SCOPE-adjusted EBITDA/interest cover will remain above 4.0x and SCOPE-adjusted debt/EBITDA below 7.0x over the next few years, supported by Encavis’ gradually improving diversification. The Outlook also assumes a limited impact on credit metrics from adverse regulatory interventions.

A rating upgrade could be warranted if Encavis maintained SCOPE-adjusted EBITDA/interest cover above 4.0x and SCOPE-adjusted debt/EBITDA were sustained at below 7.0x, together with further improvements in geographical diversification with a focus on jurisdictions with relatively stable regulatory environments and granularity of the own portfolio.

To see the updated issuer report, as well as the rating history including SCOPE's initial public rating on Encavis AG and its debt-issuing subsidiary Encavis Finance BV on March 18, 2019, please click:

https://scoperatings.com/ratings-and-research/rating/EN/174820
https://www.scoperatings.com/ratings-and-research/issuer/339070

About ENCAVIS:
The Encavis AG (Prime Standard; ISIN: DE0006095003; ticker symbol: ECV) is a producer of electricity from Renewable Energies listed on the MDAX of Deutsche Börse AG. As one of the leading independent power producers (IPP), ENCAVIS acquires and operates (onshore) wind farms and solar parks in twelve European countries. The plants for sustainable energy production generate stable yields through guaranteed feed-in tariffs (FIT) or long-term power purchase agreements (PPA). The Encavis Group's total generation capacity currently adds up to more than 3.5 gigawatts (GW), of which more than 2.1 GW belongs to the Encavis AG, which corresponds to a total saving of around 0.8 million tonnes of CO₂ per year stand-alone for the Encavis AG.

Within the Encavis Group, Encavis Asset Management AG offers fund services to institutional investors. Another Group member company is Stern Energy S.p.A., based in Parma, Italy, a specialised provider of technical services for the installation, operation, maintenance, revamping and repowering of photovoltaic systems across Europe.

ENCAVIS is a signatory of the UN Global Compact as well as of the UN PRI network. Encavis AG's environmental, social and governance performance has been awarded by two of the world's leading ESG rating agencies. MSCI ESG Ratings awarded the corporate ESG performance with their “A” level and ISS ESG with their “Prime” label.

Additional information can be found on www.encavis.com

Contact:
ENCAVIS AG
Jörg Peters       
Head of Corporate Communications & IR
Tel.: + 49 40 37 85 62 242     
E-Mail: [email protected]
http://www.encavis.com