ECONOMYNEXT – Fitch Ratings has given Sri Lanka energy firm WindForce’s proposed senior unsecured redeemable debentures of up to 4 billion rupees a National Long-Term Rating of A(lka).
“WindForce’s rating reflects its growing scale as a prominent renewable power generator in Sri Lanka and several regional markets, improving resource diversity and contractual cash flow from long-term power purchase agreements (PPAs),” the global ratings agency said.
The rating is constrained by the implied credit quality of the key state-owned offtaker, National System Operator, a successor company to Ceylon Electricity Board following the latter’s restructuring, Fitch pointed out, adding that cash flow from NSO continues to account for over 80 percent of WindForce’s EBIT.
The Fitch statement is reproduced below:
Fitch Publishes ‘A(lka)’ Rating on WindForce’s Proposed Debentures
Fitch Ratings – Colombo: Fitch Ratings has published the National Long-Term Rating of ‘A(lka)’ on WindForce PLC’s proposed senior unsecured redeemable debentures of up to LKR4 billion. The notes are rated one notch below WindForce’s National Long-Term Rating (A+(lka)/Stable) due to increasing structural subordination from secured debt at operating subsidiaries used to fund its capacity expansion.
WindForce’s rating reflects its growing scale as a prominent renewable power generator in Sri Lanka and several regional markets, improving resource diversity and contractual cash flow from long-term power purchase agreements (PPAs). The rating is constrained by the implied credit quality of the key state-owned offtaker, National System Operator (Pvt) Limited (NSO), a successor company to Ceylon Electricity Board (CEB, A(lka)/Stable) following the latter’s restructuring. Cash flow from the state-owned utility continues to account for over 80% of WindForce’s EBIT.
Fitch forecasts WindForce’s EBITDA net leverage to rise in the financial year ending March 2027 (FY27) on high debt-funded capex for new generation plants and to reduce thereafter as the new plants are commissioned, driving the Stable Outlook. However, inability to de-leverage in FY28 in line with our expectations could put pressure on WindForce’s rating.
Key Rating Drivers
Temporarily High Leverage on Capex: WindForce expects capex of over LKR40 billion for solar and wind power plants in the next two years, after most investments were shifted to FY27 due to prolonged supplier negotiations. This will drive EBITDA net leverage to peak at 9.0x in FY27, above our previous forecasts. We have factored in a six-month delay in commissioning, with cash flow due only in FY28, when leverage should fall to 5.0x. The outflows are mainly for a 100MW solar plant with integrated battery storage and a 130MW battery energy storage system across 13 locations around the country.
Execution risks for the projects are low, supported by the company’s record in similar projects, experience with joint-venture partners, and the limited construction complexity of solar and wind power plants. The requisite regulatory approvals and offtake agreements are in place, and evacuation infrastructure is completed or right-of-way established. The plants’ long-term PPAs with NSO are in place at preset tariffs, mitigating price risk, while priority dispatch for renewable-energy generators ensures demand security.
Counterparty Constrains Rating: WindForce’s rating is constrained by the implied credit quality of the key state-owned offtaker, NSO, which depends on support by the Sri Lankan sovereign (Long-Term Local-Currency Issuer Default Rating (IDR): CCC+; Long-Term Foreign-Currency IDR: CCC+).
WindForce derived around 70% of its EBIT from the previous state-owned offtaker, CEB, in FY23-FY25, with the share rising to around 80% in FY25 after it commissioned the Kebithigollawa solar project. We expect WindForce’s cash flow exposure to NSO to increase in FY26-FY29 once it commissions new projects in the pipeline.
Risks to Cost-Reflective Tariffs: Fitch sees risks to the state utility’s implementation of cost-reflective tariffs, which could weigh on its balance sheet and pressure settlements to domestic power producers. The government has several competing priorities of managing inflation, the state utilities’ financial health, and the state’s own finances. CEB’s EBIT turned negative in FY25 due to costs rising faster than approved tariff increases. WindForce’s average receivable days stood at around 75 days in December 2025, in line with seasonal trends, compared with the peak of around 350 days in FY23.
Steady EBITDA Margin: We have lowered our margin expectations for FY26-FY27 to around 65%, similar to FY25 levels, rising to around 70% in FY28 with the contribution from new projects. WindForce’s PPAs provide long-term cash flow visibility with a weighted-average remaining contract life of over 10 years, although generation volumes can be affected by seasonal and climatic patterns. This is mitigated by its diversified portfolio of wind (74MW), solar (55MW) and hydro (15MW) on an alternating current-equivalent basis across 23 power plants, excluding associates and joint ventures.
Peer Analysis
WindForce is rated one notch below domestic power producer and engineering, procurement and construction contractor Lakdhanavi Limited (AA-(lka)/Stable). The difference reflects Lakdhanavi’s larger operating scale as a critical base-load power generator in Sri Lanka, which has afforded it priority cash flow receipts from key offtaker CEB even during periods of counterparty credit stress, as well as its higher geographic and business diversification.
Both Lakdhanavi and WindForce have significant exposure to state-linked counterparties. However, Lakdhanavi also has operations and maintenance (O&M) services, manufactures transformers and switchgears, and offers galvanising services, providing a degree of diversification. We also believe the power offtaker is likely to prioritise payments to Lakdhanavi over Windforce even in situations where its own financial profile is stretched, as Lakdhanavi provides O&M services to one of Sri Lanka’s largest power plants and has invested in a large liquefied natural gas power plant, all of which are critical to Sri Lanka’s power generation and the state’s future strategy.
Resus Energy PLC (A-(lka)/Stable), a domestic power producer, is rated two notches below WindForce. Resus also benefits from contractual revenue visibility via its PPAs with the state-owned offtaker. However, Resus’ lower rating reflects its tighter liquidity than WindForce and smaller operating scale with narrower access to domestic banks.
Vidullanka PLC (A+(lka)/Stable) is rated at the same level as WindForce. WindForce has larger operating capacity than Vidullanka and more diversified power generation resources. This is counterbalanced by Vidullanka’s exposure to the state-owned utility of Uganda (B/Stable) and concentration in hydropower generation. Most of Vidullanka’s cash flow stems from overseas, while most of its debt is onshore with Sri Lankan banks, exposing the company to potential repatriation risks. However, Vidullanka’s track record of overseas receipts has been steady.
Fitch’s Key Rating-Case Assumptions
– Revenue growth averaging 4% in FY26-FY27, increasing to around 60% in FY28 as new projects are commissioned
– EBITDA margin of around 65% in FY26-FY27, increasing to around 70% in FY28 with the contribution from new projects
– Receivable days steady at around 40
– Capex of around LKR2 billion in FY26 and around LKR40 billion in FY27
– Dividend payout of 80% of prior-year profit.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
– EBITDA net leverage above 5.0x for a sustained period;
– EBITDA interest coverage below 1.5x for a sustained period.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
– A sustained and substantial reduction in the implied credit risk of the key offtaker.
Liquidity and Debt Structure
WindForce’s liquidity is subject to timely collection of dues from NSO. The company reported LKR1.6 billion of readily available cash as of 31 December 2025 and had access to around LKR7 billion in unutilised, albeit uncommitted, credit lines from local banks against LKR3.0 billion of debt maturing in the next 12 months. Maturing debt mainly comprises the current portion of long-term debt obtained to fund investments in its power plants.
We expect the company to generate negative free cash flow in the near-to-medium term due to high capex. However, WindForce has adequate access to domestic banks, as most banks are willing to provide longer-tenured facilities for the company’s operating power plants that have more than 10 years remaining under their PPAs. (Colombo/Apr17/2026)