FiinRatings has announced Credit Rating of Biwase – Long An Water Joint Stock Company (“BWE-LA”) at ‘BBB’

FiinRatings is pleased to announce that Biwase – Long An Water Joint Stock Company (“BWE-LA”) has been assigned a first-time long-term Issuer Credit Rating of “BBB” with a “Stable” outlook.

FiinRatings is pleased to announce that Biwase – Long An Water Joint Stock Company (“BWE-LA”) has been assigned a first-time long-term Issuer Credit Rating of “BBB” with a “Stable” outlook.  

This credit rating reflects FiinRatings’ assessment of BWE-LA’s business risk profile as “Satisfactory” and financial risk profile as “Significant”. Operating in the very-low-risk clean water supply sector, BWE-LA holds a fair competitive position, evidenced by its scale, operational track record, efficiency, and profitability. With a production capacity of 60,000 m³/day, the Nhi Thanh Plant (Phase 1 and 2) ranks among the largest water supply facilities in Long An province. Thanks to its strategic location which utilizes an abundant source of surface water and fulfills high demand, the Company’s profitability surpasses industry median, as demonstrated by an EBITDA margin of 68-73%. Furthermore, thanks to the new facility, BWE-LA’s water loss rate stands at only 2.3%, substantially below the national average of 16.5%. However, its limited operating history has led to a relatively low ROE, impacted by high interest and depreciation expenses during the initial years of operation. 

 BWE-LA’s credit rating is constrained by a “Significant” financial risk assessment due to its elevated leverage compared to the industry average, with debt-to-equity and debt-to-EBITDA ratios of 0.9x and 6.0x, respectively, as of December 31, 2023. With ongoing investments in the Nhi Thanh plant’s Phase 3, FiinRatings expects the Company’s debt to be 1.7-1.9 times its equity and 8.2-11.5 times its EBITDA, remaining elevated compared to long-established water companies that have largely completed their debt obligations. Nonetheless, BWE-LA maintains a suitable funding structure and liquidity position, with an average debt maturity of approximately 6.2 years, aligning with its debt-to-EBITDA ratio at year-end 2023. Additionally, the Company benefits from a principal repayment grace period for bonds funding Phase 3, yielding a liquidity coverage ratio of about 1.2x over the next 12 months. 

The “Stable” outlook is based on FiinRatings’ expectations that BWE-LA will sustain its business and financial risk profiles over the next 24 months. With the anticipated investment in the 3rd phase of the Nhi Thanh water factory, no significant changes in the Company’s operating efficiency or leverage are anticipated. Backed by the steady cash flow from operations and an adequate funding structure, we expect BWE-LA to meet its principal and interest obligations over the next 24 months. 

To read the full Credit Rating Report of Biwase – Long An Water JSC, please click [HERE]. 

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