S&P changes Power Construction to negative

S&P said it revised the outlook on Power Construction Corp. of China to negative from stable.

At the same time, the agency affirmed the company’s BBB+ long-term corporate credit rating and cnA+ long-term Greater China regional scale rating.

S&P said it revised the outlook because it expects Power Construction will continue to undertake substantial capital expenditure (capex) in investment projects in the general infrastructure sector and in power assets.

Such activity is behind a gradual multi-year rise in leverage, in the agency’s view.

The ratio of adjusted debt to EBITDA further increased to 6.7 times in 2016 from 6.3 times the prior year, while EBITDA interest coverage decreased to 2 times from 2.2 times. S&P said it does not anticipate that leverage will improve materially in the next 12 months.

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