DBRS Assigns Rating of BBB (low) with Stable Trend to TS Energy Italy SpA Senior Secured Notes

February 9, 2017

DBRS Limited (DBRS) has assigned a rating of BBB (low) with a Stable trend to the Senior Secured Notes (the Notes) issued by TS Energy Italy S.p.A. (the Issuer). The Notes were issued in July 2016 and are the first investment grade-rated project bond for renewables in Italy. The fixed-rate Notes of EUR 40.0 million will be fully amortized by June 30, 2032. The Project’s performance for the full year from and including January 1 to December 31, 2016 has been on track, well exceeding the rating case, with production of 50.9 gigawatt hours (GWh), only marginally below the P50 target of 51.8 GWh.

The Issuer owns 39 solar photovoltaic power generation installations with a total electric capacity of 43.285 megawatt-peak (MWp, DC capacity; the Project). The individual installations commenced operations between August 2012 and June 2013. The installations are located across 25 sites in Sicily, Sardinia and on mainland Italy. One-third of the capacity is ground-mounted and two-thirds are located on rooftops in 12 military barracks and on numerous commercial buildings.

The Project benefits from feed-in-tariff contracts (FIT Contracts) with Gestore dei Servizi Energetici S.p.A. (GSE) under the Quarto Conto Energia (Conto 4) incentive program. DBRS does not rate GSE, but views its credit strength as being linked to Italy’s sovereign rating (currently rated BBB (high) with a Stable trend by DBRS). The FIT Contracts are all 20 years in duration and expire between two and 12 months after the bonds have fully amortized. The contracts provide fixed, non-indexed prices covering the entire production capacity of the Project. The energy price for each installation ranges from EUR 143/MWh to EUR 264/MWh with a capacity weighted average of EUR 200/MWh. In addition to the FIT Contract revenue, 24.3 MWp of the installed capacity earns market-priced revenue. DBRS expects the market-priced revenue to account for 10% of projected revenues in 2017 and remain stable, based on conservative assumptions. Overall, the Project does not have a material reliance on the market power prices in Italy.

The Project sponsor is Talesun Solar Switzerland AG (the Sponsor), a subsidiary of Talesun Solar Technologies Co. Ltd. (Talesun Technologies). The asset manager is Talesun Energy Solutions S.r.l., a subsidiary of the Sponsor. The Issuer is another subsidiary of the Sponsor through a wholly owned Luxembourg subsidiary (TS Energy Europe SA). The operation and maintenance of the Project has been contracted to Bester Generación. Talesun Technologies supplied the polycrystalline silicon solar panels and provides associated warranties.

The rating is supported by a robust financial profile and structure, which generates a relatively steady debt service coverage ratio throughout the rating case forecast period with a minimum of 1.64 times (x) and an average of 1.70x. The DBRS rating case scenario makes conservative assumptions on availability, performance ratios (efficiency), certain costs and the market electricity prices.

All figures are in euros unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Solar Power Projects (December 2016), which can be found on our website under Methodologies.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

The article can be found online: http://dbrs.com/research/305173/dbrs-assigns-rating-of-bbb-low-with-stable-trend-to-ts-energy-italy-spa-senior-secured-notes.html 

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