Chinese IPPs’ debts to grow 9.3% for clean energy investments

In 2023, they incurred debts of around $50.3b.

The combined debt of rated state-owned independent power producers (IPP) in China is expected to grow by 9.3% to reach $71.8b (RMB520b) this year as they plan to accelerate investments in clean energy.

In a report, S&P Global Ratings said the China IPPs are boosting the debt level as they struggle with achieving their transition targets.

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"China independent power producers [IPPs] that rely heavily on coal power will likely see improved operating performance, mitigating the cost of energy transition," said S&P Global Ratings credit analyst Scott Chui. 

"However, we expect the strains will build on pure-play renewables IPPs. They will need to pay for projects just as tariffs and utilization rates are likely to decline,” Chui added.

In 2023, the rated IPPs, who have committed to having renewables account for half of their capacity by 2025, have added around $50.3b (RMB364b) in debt.

Huaneng Power International, China Resources Power Holdings, and China Longyuan Power Group Corp, amongst the rate Chinese IPPs, have committed to install seven to 10 gigawatts of renewables capacity this year, increasing by 13% to 44%, year-on-year.

S&P Global Ratings expect these companies’ average ratio of funds from operations to debt to decline to 11.2%-11.5% over 2024-20255 from 11.7% in 2023.

It added that government support is also in place such as the preferential borrowing rates which will soften the strains.

"China IPPs' low cost of debt gives them leeway to continue investing to hit China's ambitious carbon goals," Chui said.

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