Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations. 

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope has completed a monitoring review for PolSolar Kft on 24 May 2022:

Senior unsecured notes, HUF 70.7bn: B+

This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Transaction overview

The HUF 70.7bn issuance of the bonds on 22 April 2022 was higher than expected and reduced the need for additional funding. On 17 May 2022 an equity contribution of HUF 0.2bn was raised and thus completed the financing. The raised proceeds will contribute to funding the construction of five photovoltaic power plants with a total capacity of 233.5 MWAC located in Mezöcsát, in the north-east of Hungary. Each plant will have a capacity of 46.7 MWAC.

The project is in ready-to-build status and construction has not started yet apart from some enabling works. Expected final handover date is 30 September 2023, and the final commissioning deadline is 31 December 2023.

The issuer and holdco, PolSolar Kft, will on-lend the bond proceeds to the five individual opcos, which respectively own the five solar plants. The issuer’s obligations are guaranteed by the five opcos. Each opco has the right to sell the electricity produced to the Hungarian transmission service operator, MAVIR Zrt, under a feed-in tariff (the KÁT tariff) according to the generation permits provided by the Hungarian Energy and Public Utility Regulatory Authority (“HEPURA”). In case of missing the commissioning deadline, the project would not be eligible to receive the full KÁT tariff.

The sponsors of the project, Voyager Private Equity Fund and Central European Opportunity Private Equity Fund, are both midsized Hungarian equity funds, focusing on the Central and Eastern European market. The sponsors have limited experience in renewable energy projects. Sponsors’ economic incentives in the project are high because of their substantial equity contribution of 26% of total investment costs.

Key rating factors

The B+ rating reflects the total expected loss (EL) of 11.06% over the loan’s life until maturity (equivalent to a 9.85-year constant-exposure expected risk horizon).

The project is characterised by high construction risks, average operational risk, stable and predictable cashflows, high refinancing risk and a very weak financing and legal framework. The bonds are unsecured, and the covenant package and terms of the financing documents are not in line with our expectations for a typical project finance transaction. The fixed rate bonds amounting to HUF 70.7bn were subscribed by the Hungarian National Bank and commercial investors. The need for additional funding was reduced from HUF 1.8bn to HUF 0.2bn because of higher expected interest income and interest savings due to lower debt funding. Equity totalling HUF 0.2bn was raised on 17 May 2022.

The methodology applicable for the reviewed rating (General Project Finance Rating Methodology, 15 November 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Michel Graire, Senior Analyst

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