Corporate News

SCOPE Ratings affirms its investment grade issuer rating BBB- with stable outlook on Encavis AG

Hamburg, October 5^th, 2021 - SDAX-listed solar park and wind farm operator Encavis AG (Prime Standard, ISIN: DE0006095003, Ticker symbol: ECV) has been rated again by SCOPE Ratings (SCOPE) in an updated analysis affirming the investment grade issuer rating (BBB-). The outlook for the rating is Stable. The affirmation reflects SCOPE's view on Encavis' unchanged largely protected business model paired with continuously improving diversification and gradually improving credit metrics.

SCOPE has affirmed its BBB-/Stable issuer rating on Encavis AG and its financing subsidiary Encavis Finance BV. Concurrently, SCOPE affirmed the long-term ratings for senior unsecured debt at BBB-, and BB for subordinated (hybrid) debt and for short-term debt at S-2.

Encavis BBB- rating primarily reflects the Company's largely protected position as an independent power producer with the operation of a generation portfolio that comprises about 3 gigawatts (GW) in 290 renewable energy power plants (wind and solar) across Western Europe (ESG: credit-positive environmental risk factor). SCOPE regards the business model as widely protected as the vast majority of generation assets benefit from prioritised feed-in of generated electricity under availability-based remuneration schemes. Merchant risk for unregulated power plants is widely hedged through long-term power purchase agreements with creditworthy counterparties. Despite some regulatory risk such as recently evidenced through retroactive tariff cuts for part of Encavis solar assets in France, the Company's granular power generation portfolio ensures robust cash flow generation. While weather effects entail some cash flow volatility, such effects are expected to increasingly be softened by the ongoing portfolio ramp-up paired with an increasing granularity of power plant sites, limiting the incremental effects from single generation sites due to adverse weather or tariff/price adjustments. As such, SCOPE believes that Encavis will be able to retain strong margin, e.g. an EBITDA margin of above 70%, and solid cash flow conversion.

While the portfolio ramp-up is expected to be widely backed by the Company's internal funding power through operating cash flow, the closure of a new EUR 125m ESG-linked multi-year revolving credit facility is expected to accelerate expansion along the ">> Fast Forward 2025" growth strategy which targets to grow the owned generation portfolio to 3.4 GW by 2025 (compared to around 1.8 GW as of June 2021). Such enlarged financial shooting power shall enable the Company to execute on opportunistic bolt-on acquisitions of up-and-running renewable energy power plants as well as the investment in ready-to-built power plants from the >3 GW project pipeline of Encavis numerous strategic developing partners.

SCOPE's updated forecasts for 2021E-23E signal increased headroom for the Company's EBITDA against the agency's negative rating-change driver. EBITDA would need to come in 35-55% lower than forecasted before it would reach an EBITDA interest cover of 2.75x, which is the defined trigger for a ratings pressure.

Credit metrics are expected to remain robust in light of Encavis' financial policy that SCOPE views as supportive to maintain the Company's financial risk profile along the acquisitive growth strategy. SCOPE is convinced that the Group's expansion will be balanced against maintaining the financial risk profile's quality. This is evidenced by the Company's funding measures such as the usage of equity-like financing instruments, the offering of scrip dividends, the wide use of financial covenants and cash reserves at project level as well as moderate dividend growth and a minimum equity ratio of 24%.

The rating Outlook remains Stable and incorporates SCOPE's expectation that EBITDA interest coverage will trend towards 4.0x over the next few years. SCOPE also believes the Company will continue to acquire renewable energy power plants and continue to increase dividends, leaving free and discretionary cash flows at around breakeven.

A positive rating action could be warranted if Encavis strengthened EBITDA interest coverage to above 4.0x on a sustained basis paired with further improvements in the granularity of the power generation portfolio.

"The renewed affirmation of the investment grade rating BBB- awarded by the European rating agency SCOPE confirms our consistent financing policy pursued since 2016 with a focus on stable long-term balance sheet ratios", Dr Christoph Husmann, CFO of Encavis AG, welcomed the repeated rating affirmation. "Encavis' excellent credit metrics mirror the very good financial performance of the Group and offers at the same time an increasing range of future financing options to significantly reduced financing costs", Dr Husmann added.

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:

About ENCAVIS:
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 solar parks and (onshore) wind farms in ten 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 2.9 gigawatts (GW), which corresponds to a total saving of 1.31 million tonnes of CO₂ per year. Within the Encavis Group, Encavis Asset Management AG offers fund services to institutional investors.

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 "AA" and ISS ESG with their "Prime" label.

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Contact:
Encavis AG
Jörg Peters
Head of Corporate Communications & IR
Tel.: + 49 (0)40 37 85 62 242
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Twitter: /encavis