The renewed company slumped on the Oslo Stock Exchange after the first-quarter numbers were announced. Analysts believe that the Ukrainian loan-breach report frightens the market.
The market sees this breakout very negative and sends the share down by more than 10 per cent, but Scatec believes this is relatively ineffective, says analyst Evind Jarvik at Carnegie to TDN Direkt.
Scatec stock closed down nearly 11 percent after the rolling company reported its first-quarter results on Friday morning.
Consequently, the stock has recovered somewhat, after dropping by 17% at the most.
Indicates loan default
According to analysts at both Carnegie and ABG Sundal Collier, this is due to the fact that the quarterly report stated that Scatec was violating loan terms in Ukraine.
Scatec states in the report that many projects in Ukraine had not met “certain loan conditions” by the end of March.
Scatec entered the country in 2017 and is developing a wide range of solar projects. According to Pareto Securities, a difficult situation arose after the Ukrainian authorities last summer announced tariff cuts.
Scatec is a large-scale global company in hydroelectric, solar, wind and battery solutions.
Scatec plans investments of 100 billion
Scatec writes in the report that there have been requests for changes to the power purchase agreement. Since this is not approved by the lenders, it is defined as a breach of the terms of the loan.
The company also wrote that it is in dialogue with the lenders to resolve the situation, and that no intention to join the loans has been reported.
Believe in the solution
Now, a Carnegie analyst says Scatec will work with development banks and the Ukrainian state to put together a solution.
The analyst believes this solution will likely delay the repayment schedule of Scatec’s loans owed to Ukraine somewhat.
I choose to believe what the administration says in this particular “case”. Assets in Ukraine are in operation and making money today, also in new tariffs. So it’s a matter of principle for Scatec, says Garvik, and adds that it considers lowering tariffs a crime committed by the Ukrainian state.
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The analyst asserts that Ukraine in and of itself is not one of the largest markets for Scatec’s business. However, what Garvik fears may happen in the wake of this situation, are potential spillover effects on other markets.
If something similar happens, for example, South Africa or other markets, that will have a fairly large impact. But in my experience after the talks with the administration, there is no indication that this will happen, and the administration has not received any indication of this, the analyst says, but it confirms that the risks are there.