Alinta Energy Finance Ratings Placed On CreditWatch Developing Following Sale Agreement With Chow Tai Fook Enterprises

Stocks and Financial Services Press Releases Friday March 17, 2017 17:30
SYDNEY--17 Mar--S&P Global Ratings

SYDNEY (S&P Global Ratings) March 17, 2017--S&P Global Ratings said today that it had placed the 'BB' corporate credit and issue ratings on Alinta Energy Finance Pty Ltd. on CreditWatch with developing implications.

Alinta Energy Finance is the financing arm of the Alinta Energy group: the dominant gas retailer in Perth, Australia; owner-operator of 1900 megawatts (MW) of contracted generation assets; and an electricity and gas retailer on the Australian east coast markets.

The CreditWatch placement follows Alinta Energy's announcement that its major shareholders have entered into a binding sale agreement with Hong Kong-based conglomerate, Chow Tai Fook Enterprises Ltd. (CTFE; not rated), for the sale of 100% of shares in Alinta Energy.

While the sale is subject to regulatory approval, we believe Alinta Energy would conclude the sale over the next few weeks.

"The CreditWatch with developing implications reflects our view that the rating on Alinta Energy could move either up or down depending on further information regarding the sale agreement," said S&P Global Ratings credit analyst Parvathy Iyer.

Details around the transaction are very limited, including which entity within CTFE will own Alinta Energy; the credit profile of the acquiring entity; the business and financial strategy under the new owners; and the capital structure of Alinta Energy upon financial close.

Given that CTFE is not rated, it is uncertain whether the credit profile of the entity (or entities) that will own Alinta Energy will affect the rating.

In the absence of a rating impact from the new owners, we could rate Alinta Energy at least one notch higher. If we assess the credit profile of the acquiring entity to be stronger than Alinta Energy's, then the rating on Alinta Energy could improve because the current constraint of financial sponsor ownership will fall away.

This assessment is on the basis that no adverse change occurs in Alinta Energy's business or financial strategy under the new owners.

The extent of any such rating uplift in the near to medium term is most likely to emerge from improved financials rather than any group support, given that Alinta Energy will be CTFE's first investment in Australia.

On the other hand, if the credit profile of the acquiring entity were to be lower than the current rating on Alinta Energy, the former can become a rating constraint and could place downward rating pressure on the utility company.

CTFE's desire to retain Alinta Energy's current management team and structure should continue to support the utility company's operations.

Nonetheless, the new owners' commitment to Alinta Energy's diverse operations and growth aspirations will be important to our assessment of the utility company's ongoing business profile. Should the new owners adopt and remain committed to a conservative financial structure, it would provide positive momentum for the rating.

As part of the resolution of the CreditWatch, we will seek to assess the credit profile of the new owners, understand their strategy for the business, and their ongoing commitment to Alinta Energy's various business segments. We expect to resolve the CreditWatch upon conclusion of the sale and further clarity on the above issues.

RELATED CRITERIA Criteria - Corporates - General: Recovery Rating Criteria For Speculative-Grade Corporate Issuers, Dec. 07, 2016 Criteria - Corporates - Recovery: Methodology: Jurisdiction Ranking Assessments, Jan. 20, 2016 Criteria - Corporates - General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014 Criteria - Corporates - Industrials: Key Credit Factors For The Unregulated Power And Gas Industry, March 28, 2014 Criteria - Corporates - General: Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013 General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013 General Criteria: Methodology: Industry Risk, Nov. 19, 2013 General Criteria: Group Rating Methodology, Nov. 19, 2013 Criteria - Corporates - General: Corporate Methodology, Nov. 19, 2013 General Criteria: Methodology For Linking Short-Term And Long-Term Ratings For Corporate, Insurance, And Sovereign Issuers, May 07, 2013 General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012 General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

Criteria - Corporates - General: 2008 Corporate Criteria: Rating Each Issue, April 15, 2008 Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information.

Complete ratings information is available to subscribers of Ratings Direct at www.globalcreditportal.com and atwww.spcapitaliq.com.
All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

AUSTRALIA Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).


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