Fitch Ratings has assigned a National Long-Term Rating of ‘A(lka)’ to WindForce PLC’s proposed senior unsecured redeemable debentures, which could total up to LKR 4 billion. This rating is one notch lower than WindForce’s current National Long-Term Rating of A+(lka)/Stable, primarily due to increased structural subordination stemming from the secured debt held by its operational subsidiaries, which are financing capacity expansion.
The rating assigned to WindForce indicates its expanding role as a significant renewable energy producer in Sri Lanka and various regional markets, enhanced by improved resource diversification and stable cash flows from long-term power purchase agreements (PPAs). However, the rating is limited by the creditworthiness of its main state-owned customer, the National System Operator (Pvt) Limited (NSO), which succeeded the Ceylon Electricity Board (CEB, A(lka)/Stable) after the latter’s restructuring. Notably, cash flows from the state utility represent over 80% of WindForce’s earnings before interest and taxes (EBIT).
Fitch anticipates that WindForce’s EBITDA net leverage will increase during the financial year ending March 2027 (FY27) due to considerable capital expenditures funded by debt for new generation facilities. It expects leverage to decrease afterwards as new plants come online, which supports the Stable Outlook. Nonetheless, if WindForce fails to reduce leverage in FY28 as projected, its rating may face downward pressure.
Key factors affecting the rating include:
- High Leverage Due to Capital Expenditures: WindForce plans to invest over LKR 40 billion in solar and wind power projects over the next two years. This investment has been postponed to FY27 owing to extended supplier discussions, leading to an anticipated peak in EBITDA net leverage at 9.0x in FY27, exceeding previous estimates. The forecast includes a six-month delay in project commissioning, with cash flows expected only in FY28, when leverage should decrease to 5.0x. Major expenditures are allocated for a 100MW solar facility with integrated battery storage and a 130MW battery energy storage system across 13 sites nationwide.
- Low Execution Risks: The execution risks for these projects are considered minimal, backed by WindForce’s experience in similar initiatives, partnerships with joint-venture collaborators, and the straightforward construction involved in solar and wind power projects. All necessary regulatory approvals and offtake agreements are secured, and the infrastructure for power evacuation is complete or has established right-of-way. Long-term PPAs with NSO at fixed tariffs help mitigate pricing risks, while priority dispatch for renewable energy generators guarantees demand stability.
- Credit Quality of Counterparty: WindForce’s rating is limited by the credit quality of NSO, which relies on the financial backing of the Sri Lankan government (Long-Term Local-Currency Issuer Default Rating (IDR): CCC+; Long-Term Foreign-Currency IDR: CCC+).
In FY23-FY25, WindForce generated approximately 70% of its EBIT from the former state-owned offtaker, CEB, with this figure projected to rise to around 80% in FY25 following the commissioning of the Kebithigollawa solar project. Cash flow exposure to NSO is expected to escalate in FY26-FY29 as new projects become operational.
Fitch has identified potential risks associated with the state utility’s execution of cost-reflective tariffs, which could adversely affect its financial position and impact payments to domestic producers. The government faces competing demands in managing inflation, ensuring the financial health of state utilities, and addressing its own fiscal needs. CEB’s EBIT turned negative in FY25 as costs surged beyond approved tariff hikes. WindForce’s average receivable days were around 75 days in December 2025, consistent with seasonal trends, compared to a peak of roughly 350 days in FY23.
Stable EBITDA Margin: Fitch has revised its margin forecasts for FY26-FY27 to approximately 65%, similar to FY25, with an increase to around 70% anticipated in FY28 due to contributions from new projects. WindForce’s PPAs ensure long-term cash flow visibility, featuring a weighted average remaining contract duration of over ten years, though generation capacity may be influenced by seasonal and climatic variations. This risk is mitigated by its diverse portfolio, which comprises wind (74MW), solar (55MW), and hydro (15MW) on an alternating current-equivalent basis across 23 power plants, excluding partnerships and joint ventures.
Peer Comparison: WindForce holds a rating one notch lower than Lakdhanavi Limited (AA-(lka)/Stable), a domestic power producer and engineering firm. This difference highlights Lakdhanavi’s larger operational scale as a vital base-load power generator in Sri Lanka, which enables it to receive prioritized cash flows from key offtaker CEB, even during financial stress periods. Moreover, Lakdhanavi’s diverse operations, including maintenance services, transformer and switchgear manufacturing, and galvanizing services, bolster its resilience.
Resus Energy PLC (A-(lka)/Stable), another domestic power producer, is rated two notches below WindForce. Resus benefits from predictable revenue streams via its PPAs, but its rating reflects tighter liquidity and a smaller operational scale compared to WindForce. Vidullanka PLC (A+(lka)/Stable) shares the same rating as WindForce, although WindForce boasts larger operational capacity and a more varied generation profile. Conversely, Vidullanka’s concentration in hydropower and exposure to Uganda’s state utility (B/Stable) present additional challenges, despite consistent overseas cash flows.
Key Rating Assumptions by Fitch:
- Revenue growth averaging 4% in FY26-FY27, increasing to around 60% in FY28 as new projects come online.
- EBITDA margin around 65% in FY26-FY27, rising to approximately 70% in FY28 with contributions from new projects.
- Steady receivable days at around 40.
- Capital expenditures of about LKR 2 billion in FY26 and LKR 40 billion in FY27.
- Dividend payout of 80% of the previous year’s profits.
Potential Rating Changes:
Negative Rating Actions: Factors that may lead to a downgrade include sustained EBITDA net leverage exceeding 5.0x or EBITDA interest coverage falling below 1.5x for an extended period.
Positive Rating Actions: An upgrade could occur with a significant and sustained improvement in the implied credit risk of the primary offtaker.
Liquidity and Debt Considerations: WindForce’s liquidity relies on the timely collection of payments from NSO. As of December 31, 2025, the company reported LKR 1.6 billion in readily available cash and had access to approximately LKR 7 billion in unused, though uncommitted, credit lines from local banks, against LKR 3.0 billion of debt due within the next year. The maturing debt primarily consists of the current portion of long-term loans obtained for financing its power plants.
Looking ahead, WindForce is expected to generate negative free cash flow in the near to medium term due to elevated capital expenditures. Nevertheless, the company has sufficient access to domestic banks, as most are willing to provide long-term financing for its operational power plants, which have over ten years remaining on their PPAs.
Company Overview: WindForce is a leading renewable energy producer in Sri Lanka, with a total installed capacity of approximately 145MW (excluding associates and joint ventures) as of March 31, 2025. The majority of its capacity, 132MW, is located in Sri Lanka, with the remaining 13MW in Uganda. WindForce is publicly traded on the Colombo Stock Exchange.
Information sources for this analysis are detailed in the Applicable Criteria section.
WindForce’s rating is influenced by the credit quality of its key state-owned customer, NSO, which succeeded CEB after its restructuring. Cash flows from NSO constitute over 80% of WindForce’s EBIT.
