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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B+ issuer rating on UAB Atsinaujinancios Energetikos Investicijos (AEI) and maintained the Negative Outlook. Scope has also affirmed the BB- rating for senior unsecured debt.

The Negative Outlook is maintained to highlight strong refinancing risk apparent for December 2025, leaving the company dependent on the successful execution of asset sales to repay outstanding bond exposure.

The full list of rating actions is at the end of this rating action release.

Key rating drivers

Business risk profile: B+. AEI’s business risk profile is supported by two well-established portfolio companies that operate renewable energy capacities in Poland and Lithuania (positive ESG factor). Energy Solar Projekty in Poland and Saulės energijos projektai in Lithuania, both solar assets with a total installed capacity of 67 MW, operate under regulated frameworks (Contract for Difference & Feed in Tariffs) and provide recurring income to the holding company. Nonetheless, AEI’s business risk profile is constrained by the delay in the investment ramp-up of the portfolio, leading to high income concentration in 2023. Although the number of income-generating assets has somewhat improved (power generation assets of three portfolio companies in Lithuania have started operations at the end of 2023 and are therefore already expected to generate income for the holding company in 2024), the granularity of recurring income from portfolio companies remains a credit weakness. Another constraint is the investment holding’s limited track record.

Financial risk profile: B+. AEI’s financial risk profile constrains the rating. This is mainly driven by the company’s liquidity profile and its volatile total cost cover, which is likely to reach 0.8x in 2024 compared to 1.0x in 2023. This level implies that recurring cash income will be insufficient to cover all costs at holding company level. At the same time, as AEI approaches the divestment stage, it will likely receive accrued interest income from the repayment of shareholder loans or acquired bonds following assets disposals. In this case, Scope estimates that the total cost cover ratio is likely to reach 2.2x in 2024.

As expected, leverage – measured by the loan/value ratio – increased significantly from a low 5% at YE 2021 to 37% at YE 2023, in line with the development of the portfolio. The holding company is reinvesting in portfolio ventures using cash proceeds from capital markets and equity funding. As a result, its total indebtedness – as indicated by Scope-adjusted debt – increased from EUR 3.7m at YE 2021 to EUR 91.3m as of June 2024, driven by payouts to portfolio companies to facilitate the construction of solar and wind assets. Scope expects AEI to scale back its net debt exposure significantly by YE 2024 following assets disposals and subsequent shareholder loan redemptions by portfolio companies. This could already result in a net cash position. However, this remains dependent on the successful execution of envisaged disposals.

Liquidity: inadequate. Liquidity is considered inadequate with remediation upon successful execution of asset disposals. Scope points to significant refinancing risk (tail risk) regarding the refinancing of an assumed debt volume of about EUR 91m in December 2025. To mitigate this risk, AEI has already initiated asset sales in 2024. Additional asset sales are planned in the remainder of 2024 and 2025 whose proceeds would also be earmarked for debt redemption at the holding level. The nature of the assets that AEI’s portfolio companies are currently operating and which are likely to be disposed to a large extent over the next 18 months provides some comfort about sufficient investor demand. This could well support the company’s plan to execute asset sales that would support a successful refinancing.

While Scope acknowledges that liquidity would become adequate should asset disposals be executed as envisaged, this is associated with high uncertainty. Refinancing risk could remain high if: i) portfolio ventures cannot be sold on a timely basis and financing provided to portfolio companies cannot be redeemed in full as expected before the maturity dates of the debt financing instruments used at the holding level; ii) sales prices for portfolio ventures and associated redemptions of shareholder loans and bonds cannot be achieved as expected; or iii) proceeds from assets sales in 2024 are invested in the development of new renewable projects rather than being directed to the repayment of outstanding debt exposure. Consequently, Scope applies a negative one notch adjustment for liquidity within the financial risk profile to reflect the refinancing risk in 2025 based on AEI’s limited track record so far and the only partial sale of portfolio companies. Scope is closely monitoring the company’s progress on asset disposals.

Supplementary rating drivers: credit-neutral. Supplementary rating drivers have no impact on the issuer rating.

Outlook and rating sensitivities

The Negative Outlook reflects significant refinancing risk related to refinancing requirements in December 2025 and is subject to execution of assets disposals in 2024. Given AEI’s limited track record on asset disposals (only partial sale of two portfolio companies) there is significant uncertainty about sufficient asset disposals by the time of the refinancing.

The upside scenario for the ratings and Outlooks are (collectively):

1. Substantial progress on asset disposals that would reduce refinancing risks in December 2025

The downside scenarios for the ratings and Outlooks are (collectively):

1. No substantial progress on asset disposals that would reduce refinancing risks in December 2025 which would lead to deteriorating view on the company’s liquidity profile
    
2. The default of any portfolio company that triggers refinancing needs at the holding company level and liquidity constraints

Debt rating

The senior unsecured debt rating has been affirmed at BB-, one notch above the issuer rating.

Scope expects an above-average recovery for senior unsecured debt issued by AEI (senior unsecured bonds issued under the unsecured fixed-rate note programme). The recovery assessment is based on a liquidation value at a potential default.

In a liquidation scenario, project debt (bank loans) to special-purpose vehicles owned by portfolio companies and to which AEI has provided shareholder loans will be recovered first. Remaining proceeds from the disposal of operational and unfinished renewable energy power plants could be used to redeem the shareholder loans, which would support the recovery of senior unsecured debt at holding company level.

The recovery analysis signals a robust, conservative advance rate for recoverable assets (e.g. 50% on expected property, plant and equipment), warranting a one-notch uplift for senior unsecured debt and leading to the BB- debt category rating.

Environmental, social and governance (ESG) factors

All of AEI’s investments are channeled into portfolio companies that operate renewable energy assets in Lithuania and Poland – markets which are chronically short of electricity generation capacities and have a significant annual electricity generation deficit (net importers). Such portfolio exposure has attracted money flows with regards to green bond funding or direct equity contributions that supported the holding’s growth and investment ambitions.

All rating actions and rated entities

UAB Atsinaujinancios Energetikos Investicijos

Issuer rating: B+/Negative, affirmation

Senior unsecured debt rating: BB-, affirmation

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 16 October 2023; Investment Holding Companies Rating Methodology, 17 May 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Kamila Bernadeta Hoppe, Senior Specialist
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 20 June 2022. The Credit Ratings/Outlook were last updated on 16 June 2023.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.
 
Conditions of use/exclusion of liability
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