Announcements Corporate Rating Alerts

GCR Accords an Indicative Rating of A-(NG) to Proposed NSP-SPV POWERCORP PLC’s Series 2 Bonds.

Lagos Nigeria, 15 January 2021 — Global Credit Ratings has accorded an indicative national scale rating of A-(NG) to proposed NSP-SPV POWERCORP PLC’s Series 2 Senior Unsecured Bond; with the outlook accorded as Stable. The rating is valid until May 2021.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to NSP-SPV POWERCORP PLC (“the Issuer”) based on the following key criteria:

NSP-SPV was incorporated in 2017 as a special purpose vehicle to raise funds from the Nigerian capital market or other international markets by way of debt and other forms of capital to finance various capital projects. The Series 2 Fixed rate bonds are the second series of bonds to be issued under the Issuer’s N50bn Bond Issuance Programme (“Programme”). The first series (Series 1 Bonds) were guaranteed senior fixed rate bonds, through which the Issuer raised an aggregate sum of N8.5bn in February 2019. The current Issue (Series 2 Bonds) is aimed at raising an aggregate sum of up to N5.5bn. The Series 2 Bonds will constitute direct, unsecured, unconditional and unsubordinated obligations of the Issuer.

North South Power Company Limited (“the Sponsor”) is one of the key players in the highly fragmented electricity generation market in Nigeria, with demonstrated ability to profitably manage and operate the 600-megawatt Shiroro Hydro Electric Power Plant, under a 30-year concession agreement with the Federal Government of Nigeria. GCR affirmed NSP’s long term national scale rating of A-(NG) in December 2020, with the outlook accorded as stable.

NSP’s leverage position is considered low, giving it reasonable headroom to absorb more debt to fund capex. Adjusted for projected commitments, gearing metrics is expected to remain moderate within 75%-125% range.

The Issuer intends to raise funds from the capital market, such that proceeds of the issuance will be passed through to the Sponsor and Co-obligors under the terms of the Series 2 Trust Deed. Accordingly, the Issuer and Co-obligors have put in place a Deed of Covenant, through which the Sponsor and Co-obligors undertake to absolutely, irrevocably and unconditionally guarantee the payment and performance of all obligations of the Issuer in respect of the Series 2 Bonds. The transaction mechanism requires the Issuer to establish and maintain a debt service reserve account in the name and under the control of the Trustee, to be funded with an aggregate of one year’s worth of coupon and principal repayment.

A legal opinion from the solicitor to the Trustees (Templars) of the Series 2 Bonds confirms that the transaction documents are legal, valid, binding and enforceable against the Issuer by third parties and any insolvency official. Also, the security deed is stated to be enforceable notwithstanding the bankruptcy or insolvency of the Issuer.

Given that North South Power Company Limited offers timely and full coverage of all payments due to the bondholders, under the Series 2 Bonds through the Deed of Covenant, the Bonds bear the same default risk as its Sponsor and would reflect similar recovery prospects to senior unsecured creditors in the event of a default. As such, the long term rating for the Series 2 Bonds is equivalent to the Sponsor’s long term senior unsecured rating.

A downgrade in the rating of the Sponsor and/or a revision to the terms of the transaction documents could impact the final ratings to be accorded.

NATIONAL SCALE RATINGS HISTORY

Rating Class Rating Outlook Date
Initial/Last rating
Long term A-(NG) Stable December 2020

ANALYTICAL CONTACTS

Primary Analyst

Funmilayo Abdulrahman

Senior Credit Analyst

funmilayo@gcrratings.com

Committee Chairperson

Dave King

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Corporate Entities, updated February 2018

NSP rating reports (2017-20)

Glossary of Terms/Ratios (February 2018)

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity; d) the ratings expire in August 2019.

NSP participated in the rating process via written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit ratings have been disclosed to North South Power Limited.

The rating above was solicited by the Issuer of the Transaction, GCR has been compensated for the provision of the rating.

The information received from the Arrangers and other reliable third parties to accord the bond rating included: Executed Programme Prospectus, Draft Series 2 Pricing Supplement, NSP-SPV Powercorp PLC incorporation documents, Executed Programme Trust Deed, Draft Series 2 Trust Deed, and Draft Legal Opinion from Templars.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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