Fitch Ratings has assigned Sri Lankan power producer Resus Energy PLC a National Long-Term Rating of ‘A+(lka)’. The Outlook is Stable.
Resus’s rating reflects its cash flow visibility from fixed long-term contracts and the increasing balance between hydro and solar assets, which will mitigate operational volatility arising from climatic conditions. This is offset by Resus’s small scale, high counter party risk, customer concentration and moderate financial profile. Resus sells all its power generation to state-owned Ceylon Electricity Board (CEB, AA- (lka)/Stable), which is the country’s sole electricity transmitter. CEB has a weak stand alone credit profile and is rated at the same level as the sovereign (CCC), reflecting our assessment of very strong likelihood of support given the essential service it provides. However, the weakening financial position of the state and CEB has led to payment delays to power generators, including Resus.
We expect Resus’s receivable days to increase to 160 days in the next couple of years, from 152 days as of March 31, 2021 (FY21). Resus saw an improvement in receivable days to around 145 by September 2021 amid bulk payments from CEB. However, further weakening in CEB’s financial profile during the year from rising oil and coal prices, which it cannot pass on to end-customers, is likely to lead to higher receivables. Oil and coal account for around 60% of the country’s power generation. Resus’s scale will remain small even when installed capacity doubles to 29MW by FY23 (FY21: 14.5MW), although the expansion should support 30% revenue growth a year over the next two years.
Resus accounts for only 0.3% of the country’s installed power capacity and generation, and we do not expect a significant improvement in the contribution in the next few years despite the capacity additions.
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