Fitch rates Power Construction notes BBB+

Fitch Ratings said it assigned an expected rating of BBB+ to Power Construction Corp. of China's proposed dollar-denominated perpetual capital securities, along with an expected rating of A- to its dollar-denominated senior unsecured notes.

The perpetual capital securities and senior notes will be issued by DianJian Haiyu Ltd., Power Construction's 58.34% indirectly owned subsidiary and are unconditionally and irrevocably guaranteed by Power Construction, Fitch said.

The proposed perpetual securities, although they are senior obligations, are rated one notch lower than Power Construction's A- issuer default rating to reflect the notes' coupon deferral feature, the agency said.

The proposed senior notes are rated at the same level as Power Construction's senior unsecured rating because they constitute its direct and senior unsecured obligations, Fitch noted.

Fitch said it notched the company's issuer default rating two levels lower than China's long-term issuer default rating of A+ in line with the agency's top-down approach for government-related entities.

The outlook is stable, reflecting an expectation of continued state support for Power Construction, the agency said.

The company has maintained its leading position in China's renewable-energy E&C market in 2018, supporting its strong strategic and operational state ties, Fitch said.

But the company generated negative operating cash flow for the second year in a row in 2018, despite steady growth in EBITDA, the agency said.

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