Credit Spectrum Corp. (CSC), the independent credit rating agency that specialises in structured finance ratings, has assigned a long-term credit rating of Baa1 (Adequate) to the Class A notes of the £100 million Engenera Green Bonds notes programme, issued by Engenera Green Bonds Plc.
Structured by Convexity Capital Partners, the first series of bonds were issued from the programme in November 2019. The initial series of bonds offer investors a 5-year senior secured, asset-backed bond, which is listed on Euronext Dublin (GEM) and the Frankfurt Stock Exchange, paying 7.00% interest.
Credit Spectrum Corp said the rating is based on the prospectus data, transaction structure, Engenera’s capacity to maintain and operate the Program, the bankability of solar PV asset finance, and the outlook for solar PV growth in Engenera’s market. Its key credit strength is the sufficiency to repay bondholders over a 3.7-year average life after applying a severe haircut to collections, and, on the operational side, Engenera’s experience and reputation. The key credit risks for bondholders are refinancing risk at the 5-year termination and operational dependence on Engenera for serving the full 20-year contractual term of the energy agreements.
It said its Baa1 rating means that expected simulated cash flow impairment is approximately 20 BPS and its repayment capacity is adequate-to-strong on the investment grade spectrum.
Proceeds from the initial series (and future series) will allow renewable energy specialist Engenera Renewables Group to install a range of renewable technologies, with a particular focus on solar photovoltaic and renewable heat, to its customers, which are typically companies and public sector bodies with a lot of roof or ground space.
Lack of funding is a major obstacle for businesses looking to implement a carbon strategy. Proceeds from Engenera’s bond programme can be used to install rooftop and ground-mount solar PV Systems free-of-charge for clients who then enter into a power purchase agreement (PPA), which typically lasts for 20-25 years.
Engenera is an established operator. Since 2017, it has completed nearly 180 installations. Having initially started out by selling, installing and maintaining systems for its customers, Engenera diversified its offer to include projects installed under PPAs with the backing of a small number of investors. Engenera’s bond programme now enables the company to fund projects itself, and this has increased the number of installations it is able to achieve while also speeding up the decision-making process.
Engenera’s bond programme provides the capital that enables the company to offer the no capital outlay solution to its customers. Bondholders receive a 7.00% fixed rate of interest on their bonds with the cash to pay the coupon coming from the PPA cashflows that Engenera puts in place with its customers.
Furthermore, the deal is asset-backed to include with underlying PPAs. Therefore, once all proceeds have been successfully deployed, investors’ security is a pool of long term, index-linked cash flows. Over time as the bond programme establishes itself, Engenera intends to establish a number of portfolios, each dedicated to a specific sector.
Bryan Glendinning, Chief Executive Officer, Engenera Renewables Group, said:
“We are delighted to have successfully secured a rating on this funding programme that is so important to our delivery. The programme has already secured interest from a range of investors but this investment grade rating should give investors reassurance of the merits of the programme and what we are trying to achieve.”