이 기사는 2021년 08월 17일 08시04분 thebell에 표출된 기사입니다

Hanwha Energy’s credit profile is unlikely to improve after a merger between the South Korean company and its parent H-Solution as they are already considered as one entity from a credit perspective.

H-Solution will merge into its subsidiary Hanwha Energy, the companies announced last Wednesday, prompting domestic credit rating agencies to review the merger’s impact on Hanwha Energy’s credit profile.

H-Solution is a pure holding company which owns a 100% stake in Hanwha Energy. The merger transaction is anticipated to close before October.

Hanwha Energy said it expects the merger to help improve its financial position by eliminating redundant costs and increasing the asset base.

However, credit rating agencies said a meaningful improvement in Hanwha Energy’s financial condition is unlikely after the merger because H-Solution’s debt is believed to have increased in the first half of this year.

H-Solution participated in a rights issue by Hanwha Systems in June, acquiring additional shares worth 138.4 billion won ($118.4 million). Although privately-held H-Solution does not disclose quarterly financial statements, credit analysts believe the company took on additional debt as its dividend income from Hanwha Energy would not sufficient to fund the investment.

Hanwha Energy is also in a weak financial position largely due to its heavy investment in solar power. Its total debt stood at 3 trillion won with a debt ratio of 221% at the end of March on a consolidated basis.

Additionally, the two companies are already considered as one entity from a credit perspective, with Hanwha Energy comprising a significant share of H-Solution’s consolidated assets and revenues.

Earlier this year, both Hanwha Energy and H-Solution’s credit ratings were downgraded by one notch to A+ and A0, respectively. “The merger of the two companies does not mean any changes in Hanwha Energy’s business direction and investment approach, and is thus unlikely to be credit positive for Hanwha Energy’,” said a credit analyst.

Debt likely to further increase

Hanwha Energy is expected to face an increasing need for funds in the next few years. In June, Hanwha Energy and Hanwha Solutions agreed to jointly acquire a 24.1% stake in Hanwha General Chemical from Samsung affiliates in a 1 trillion won deal.

Hanwha Energy is set to buy the chemical company’s shares worth 520.7 billion won, of which 200 billion won will be paid later this year with the remainder paid over the next three years.

If the deal is completed, Hanwha Energy will become Hanwha General Chemical’s parent company, with a 51.7% stake. This could help improve the company’s consolidated financial position and lead to an increase in dividend income.

But Hanwha Energy is likely to fund the stake purchase through debt financing, rather than internal funds, as it needs to spend a large amount of money on capital expenditure.

“Hanwha Energy’s acquisition of Hanwha General Chemical will likely help improve the company’s business outlook in the medium term,” said Korea Ratings. “But its financial position would deteriorate in the short term.” (Reporting by Ji-Hye Lee)