Mong Duong Finance Holdings BV — Moody's upgrades Mong Duong Finance's senior secured rating to Ba2; changes outlook to stable – Yahoo Finance

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Rating Action: Moody's upgrades Mong Duong Finance's senior secured rating to Ba2; changes outlook to stableGlobal Credit Research – 07 Sep 2022Hong Kong, September 07, 2022 — Moody's Investors Service has upgraded Mong Duong Finance Holdings BV's USD senior secured notes rating to Ba2 from Ba3.At the same time, Moody's has revised the outlook to stable from positive.The rating action follows Moody's upgrade of Vietnam's ratings to Ba2 from Ba3, with an outlook revision to stable from positive on 6 September.For full details on the sovereign rating action, please refer to this press release:https://www.moodys.com/research/Moodys-upgrades-Vietnams-rating-to-Ba2-outlook-changed-to-stable–PR_468174 "The rating action on Mong Duong Finance reflects Moody's assessment that the notes' rating is constrained by the sovereign rating. Therefore, the upgrade of Vietnam's rating results in a higher rating for the notes," says Mic Kang, a Moody's Vice President and Senior Credit Officer. Mong Duong Finance is a finance entity whose credit profile is closely linked to AES Mong Duong Power Company Limited (MDP), which owns and operates the underlying power project, because of several structural features. MDP operates with the assurance that the government will make reliable and timely payments to MDP, if and when required, under the Government Guarantee and Undertaking Agreement (GGU) and the Build Operate Transfer (BOT) contract. RATINGS RATIONALE The Ba2 rating reflects MDP's fully contracted cash flow under a long-term power purchase agreement (PPA) and solid financial profile relative to the rating. The PPA contains a robust tariff structure allowing for the recovery of costs and realization of capital returns, so long as material offtaker and fuel supplier risks do not emerge. The government's commitment to MDP under the GGU and the BOT contract supports the predictability of the company's operating cash flow, while mitigating MDP's risk exposure to its single offtaker, Vietnam Electricity, and its sole coal supplier, Vietnam National Coal-Mineral Industries Group (Vinacomin). Under the GGU and the BOT contract, the government guarantees the performance of all payment obligations and all financial commitments of Vietnam Electricity and Vinacomin. MDP is eligible for compensation should Vinacomin be unable to supply coal. MDP's ownership structure will change, subject to approvals from stakeholders — including the government — following The AES Corporation's (Baa3 stable) announcement that it signed an agreement to sell its entire 51% stake in MDP to a consortium led by a US-based investor in January 2021. The sale process is still ongoing. The terms of the notes require new owner(s) to meet the conditions for a qualified transferee, which include (1) a tangible net worth of at least $300 million or ratings of Ba1 or above by Moody's or other rating agencies, and (2) substantial experience operating fossil fuel power plants. Moody's expects MDP's average debt service coverage ratios (DSCR) to be 1.3x-1.5x during the tenor of the notes. This level of credit metrics will support MDP's credit quality. MDP recorded a DSCR of 1.5x-1.6x in 2020-21. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONSMong Duong Finance's exposure to governance risk is neutral to low. But governance risk could increase if the sponsor profile or commitment declines as a result of the potential ownership change.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The stable outlook on the rating reflects Moody's expectation that MDP's operating and financial performance will continue to support its credit profile over the next 12-18 months, while at the same time, the rating remains constrained by the sovereign rating. Moody's could upgrade the rating if Vietnam's sovereign ratings are upgraded; and (1) the government's strong commitment to MDP's power project remains intact; (2) MDP maintains its solid operations and financial leverage; and (3) MDP's sponsor profile does not weaken. Moody's could downgrade the rating if (1) Moody's takes a negative rating action on the sovereign; (2) MDP's DSCR falls below 1.1x during the amortization period; and/or (3) MDP's sponsor profile weakens as a result of the potential ownership change, contrary to Moody's expectation. The principal methodology used in this rating was Power Generation Projects Methodology published in January 2022 and available at https://ratings.moodys.com/api/rmc-documents/361400. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology. Mong Duong Finance Holdings BV is the issuer of the USD notes. Mong Duong Finance is indirectly owned by (1) AES Mong Duong Holdings B.V. (51%), a subsidiary of The AES Corporation (Baa3 stable); (2) POSCO Energy, which is owned by POSCO (Baa1 stable); and (3) Stable Investment Corporation (19%), which is owned by China Investment Corporation, a sovereign wealth fund of the Government of China (A1 stable). The ultimate shareholders of Mong Duong Finance mirror that of AES Mong Duong Power Company Limited (MDP). MDP is a limited liability joint venture that owns and operates two sub-critical coal-fired power plants with a total capacity of 1,120 megawatts. The plants are located around 220 km east of Hanoi (50 km north-east of Ha Long City in Quang Ninh Province). REGULATORY DISCLOSURES For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions. For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity. The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com. Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entity is participating and the rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process. Please refer to https://ratings.moodys.com for the Regulatory Disclosures for each credit rating action, shown on the issuer/deal page, and for Moody's Policy for Designating Non-Participating Rated Entities, shown on https://ratings.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235. The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com. The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com. Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating. Mic Kang VP – Senior Credit Officer Project & Infrastructure Finance Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong, China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Terry Fanous MD-APAC Proj Infra Fin Project & Infrastructure Finance JOURNALISTS: 61 2 9270 8141 Client Service: 852 3551 3077 Ray Tay Senior Vice President/Manager Project & Infrastructure Finance JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong, China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. 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