China Three Gorges upgraded to ’A+’ by S&P Global Ratings on enhanced competitiveness

Investing.com -- S&P Global Ratings has upgraded the long-term issuer credit rating of China Three Gorges (SS:600116) Corp. (CTG) to ’A+’ from ’A’ as of April 14, 2025. The upgrade reflects the company’s improved competitiveness and operating efficiency in the clean energy sector amid China’s rapid energy transition.

CTG’s market position in clean energy development has strengthened, with its hydropower’s stable power output and lower operation costs emphasizing its role in China’s decarbonization and energy transition process. The company’s operating efficiency has also seen an improvement due to the joint dispatching of six dams.

The credit rating agency revised the stand-alone credit profile of CTG to ’a’ from ’bbb+’. It also noted that CTG will continue to maintain its irreplaceable role to the central government and is likely to receive extraordinary support.

CTG, the world’s largest hydropower enterprise by installed capacity and power generation, has a robust market position and is expected to generate stable cash flow while maintaining discipline in debt growth over the next two years. The company’s stable rating outlook is also reflective of the outlook on China’s sovereign rating.

CTG’s clean power generation and resilient revenue have enhanced its competitiveness amid China’s accelerated energy transition. The company had 78 gigawatts (GW) of operation capacity from large hydropower projects as of the end of 2024. The pricing model for CTG’s hydropower is more resilient and stable than for other fuel types, with less market volatility relative to other renewable energies.

The company’s large-hydro generation volume, signed with grid companies via long-term contracts at relatively stable prices, contributed more than 60% of EBITDA in 2024. Apart from hydropower, CTG had about 52GW of onshore wind and solar capacity in its clean energy portfolio as of 2024. It also operates over 7GW of offshore wind farms, the largest in the country.

CTG’s renewable portfolio has expanded by over 400% over the past five years, demonstrating the company’s strong market access and executional capability on projects beyond its core hydropower business.

CTG’s operating efficiency improved following the full commissioning of its two new mega dams, Wudongde and Baihetan. The joint dispatching of the current six mega reservoirs along the Yangtze River boosted annual generation volume by over 12 billion kilowatt hours in 2023, a rise of more than 30% from the previous year.

CTG’s financial profile is expected to remain healthy despite elevated capital expenditure (capex) over the next three years, largely used to develop large-scale renewable energy generation assets. The company also benefits from China’s low interest rates and the government’s preference for renewable energy.

The company’s funds from operations (FFO) cash interest coverage is expected to be 5.0x-5.5x for the next two to three years, while its ratio of FFO to debt will likely hover around 13% over the same period.

CTG is 100% government owned and plays an essential role in accelerating energy transition and providing essential social functions such as flood control and provision of navigation services on the Three Gorges section of Yangtze River, China’s most important waterway.

The stable outlook reflects S&P’s view that CTG will maintain cost competitiveness under a predictable and stable pricing framework for its large hydro power projects. The outlook also factors in CTG’s enhanced operating efficiency and ability to temper the near-term profitability pressure from the increasingly market-priced renewable segments.

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