Mong Duong’s note ratings unaffected by ownership change in near term: Fitch

AES Corporation's agreement to sell its 51% stake in AES Mong Duong Power Company Limited and Mong Duong Finance Holdings B.V. to Sev.en Global Investments Pty Ltd will not materially alter Fitch Ratings’ credit view of the senior secured notes issued by Mong Duong Finance in the near term.

However, rating implications in the medium to long term will be contingent on the new investor’s approach to the underlying assets, Fitch Ratings said in a note on Monday.

Mong Duong Finance, a Netherlands-domiciled special purpose vehicle, issued $679 million of 5.125% senior secured notes due 2029 to acquire all of Vietnam-based AES Mong Duong Power’s outstanding project financing loans raised for the Mong Duong 2 power plant.

The plant, one of the first independent power producers in Vietnam, is a 2x560MW sub-critical coal-fired power plant in Quang Ninh province, northern Vietnam. It is operating under a build-operate-transfer (BOT) contract with Vietnam's Ministry of Industry and Trade for 25 years until 2040.

Mong Duong 2's management believes the impact of the transaction on the power plant's operation will be limited, as the operating team is directly employed by Mong Duong rather than AES.

The project is financed under a typical non-recourse project-finance model, whose structure essentially relies on the project’s own cash flow for debt repayment.

“The rating on the notes, therefore, did not receive any material benefit from extra support from the current investors. In addition, the covenant package for the notes effectively protects noteholders from cash leakage and additional debt-raising via debt service coverage ratio tests,” Fitch Ratings commented.

Prior to the transaction, AES Mong Duong Power Company was jointly owned by AES (51%), Posco International Corporation (30%), and China Investment Corporation (19%).

The transaction is in line with AES’ intent to exit the majority of its coal assets by the end of 2025. Its completion is subject to approval by the Vietnamese government, the trade ministry, and other counterparties.