Can Green Giants Unload the Weight? Fitch’s Forecast Adds Suspense

Fitch Ratings has released a fresh outlook on Asia-Pacific’s non-thermal power generation companies (gencos), forecasting a slow but steady path to financial deleveraging. The report, published late on July 29, 2025, highlights how capex-heavy years are giving way to more disciplined financial strategies, especially among state-owned enterprises driving the region’s green energy transition.

Deleveraging Trajectory and Financial Metrics

• Average EBITDA net leverage for rated APAC non-thermal gencos is expected to decline from 7.7x in 2024 to 6.7x by 2027
• The moderation is attributed to lower capex intensity and gradual EBITDA growth
• Free cash flow after acquisitions and divestments is projected to remain negative through 2027
• Most issuers are state-owned and rated top-down under Fitch’s Government-Related Entities or Parent-Subsidiary Linkage criteria

Key takeaway: While leverage remains elevated, the trajectory is improving as past investments begin to yield returns and expansion slows.

Country-Level Dynamics and Policy Shifts

China:

• Wind and solar growth is set to decelerate after a massive installation spree through 1H25
• A new tariff mechanism introduced in June 2025 requires part of the output to be sold at fixed rates and the rest at market prices
• This dual-pricing model adds uncertainty to project returns and may dampen investment enthusiasm

India and South Korea:

•  Renewable capacity additions are expected to remain high due to aggressive government targets
•  India’s auction-based model and Korea’s nuclear revival are key drivers of expansion
•  Improved receivables from state discoms in India are helping stabilize cash flows

Key highlight: Policy ambition remains strong, but regulatory tweaks and market pricing pressures could reshape investment appetite.

Tariff Pressures and Competitive Headwinds

• Future projects may face lower tariffs due to increased competition and intra-day pricing volatility
• Market-based pricing models are gaining traction, especially in China, leading to margin compression
• Despite these challenges, non-thermal gencos enjoy greater cash flow stability than thermal peers, thanks to insulation from fuel price shocks

Key insight: The shift toward market pricing introduces volatility, but the sector’s structural advantages offer resilience.

Issuer Spotlight: Greenko Energy Holdings

• Fitch maintains a Negative Outlook on Greenko’s BB rating
• The concern stems from low headroom in EBITDA interest coverage, which hovers near the 1.5x sensitivity threshold
• Greenko’s deleveraging depends heavily on improved receivables and disciplined capex execution over the next 12–18 months

Key takeaway: Greenko’s rating pressure underscores the broader sector’s vulnerability to cash flow timing and debt servicing risks.

Conclusion
Fitch’s latest analysis paints a cautiously optimistic picture for APAC’s non-thermal gencos. While the sector is still navigating high leverage and negative free cash flows, the peak of capex intensity appears to be behind it. With policy support, disciplined expansion, and improving operational metrics, the region’s green energy giants are slowly but surely moving toward financial stability.

Sources: Fitch Ratings official release dated July 29, 2025; APAC Power Gencos (Non-Thermal) – Peer Credit Analysis