NC-METH-001 v1.1 — Annex G: Per-Tenant Credit Framework¶
Industry-Tier Proxy · Concentration Treatment · ESA Risk-Grading¶
12 May 2026 · Internal · Author: AI-assisted, B. Signer / J. Yong / M. Forni review
G.0 Overview¶
Annex G closes AUDIT-027 by providing a framework for credit-grading tenant-attributed segments in the IEAT Solar Investment Program.
The framework addresses a real methodology gap identified in the R3 audit: Tier-1 anchor designation in Part B § B.8 is a necessary but not sufficient signal of low default risk. "Investment-grade group parent" tells you something — but a wholly-owned subsidiary may be undercapitalised relative to parent; a publicly-listed parent may have variable credit profile; concentration in a single group's multiple subsidiaries can mask correlated default risk.
This annex supplies: 1. A credit grading scheme (G.1) that produces a per-tenant grade 2. An industry-tier proxy (G.2) for tenants without public credit ratings — most Thai industrial tenants 3. A concentration treatment framework (G.3) — group-level aggregation, thresholds, stress scenarios 4. Application to LC's 12 Tier-1 anchors (G.4) — methodology applied; per-tenant grades [PENDING WP4] 5. Treatment in the financial model (G.5) — how grades feed expected loss 6. LOI campaign integration (G.6) — how grades sequence Tier-1 outreach
G.0.1 What this annex does NOT do¶
- Does not replace credit due diligence. Grades are screening tools; tenants whose grade matters materially to the deal still need bespoke credit work.
- Does not bind the financial model to specific risk-weighting. The grade-to-probability-of-default mapping in G.5 is a reference; lender-side IE (per Part E § E.4.9) may use different mappings.
- Does not fully execute on LC today. The framework is locked in v1.1.0; per-tenant grades for LC's 12 anchors are produced by WP4 (Benedikt + analyst, weeks 5–8).
G.0.2 What changes when Annex G locks¶
Once Annex G is locked with WP4-validated per-tenant grades: - LC's 12 Tier-1 anchors each carry an A/B/C/D grade - Concentration scoring is explicit (per G.3) - ESA prioritisation in LOI campaigns flows from the grades - Future estates inherit the framework; their tenant inventories grade through the same scheme
G.1 Credit grading framework¶
G.1.1 Four grades¶
The framework uses four grades, anchored on default probability over a 25-year operational period:
| Grade | Default probability (25-yr) | Description |
|---|---|---|
| A | ≤ 5% | Investment-grade group + capitalised subsidiary; low correlation |
| B | 5–15% | Strong group, subsidiary capitalised; or moderately-capitalised group, very strong subsidiary |
| C | 15–30% | Weak group, OR thinly capitalised subsidiary, OR concentration risk |
| D | > 30% | High default risk; not Tier-1 viable; recommend tenant-direct ESA only with collateral or replace from reserve |
Probability-of-default ranges are calibrated against historical industrial-tenant default data (DBD Thailand + S&P industrial sector defaults 2000–2024); annual recalibration per Part F § F.4.
G.1.2 Grading criteria (five dimensions)¶
Each criterion is scored 0–4 points; grades aggregate to determine final grade.
Criterion 1: Parent / group credit profile (0–4 points)
| Score | Profile |
|---|---|
| 4 | S&P or Moody's investment-grade rating (BBB-/Baa3 or above); large multinational |
| 3 | Public company on SET/SETHD or major international exchange; no formal rating but transparent financials |
| 2 | Privately-held with strong group balance sheet (positive equity, debt-to-equity < 2.0×, multi-year profitability) |
| 1 | Privately-held with weaker financials but operating cash flow positive |
| 0 | Distressed, recent default, or financially opaque |
Criterion 2: Subsidiary capitalisation (0–4 points)
| Score | Subsidiary status |
|---|---|
| 4 | Strongly capitalised; positive net assets; multi-year profitable operations |
| 3 | Adequately capitalised; positive net assets; recent profitability |
| 2 | Thinly capitalised; positive but small net assets; cash flow break-even |
| 1 | Undercapitalised; reliant on parent support; loss-making |
| 0 | Distressed or parent-dependency required for solvency |
Criterion 3: ESA tenor alignment with lease (0–4 points)
The ESA tenor must align with the tenant's lease tenor at the estate. Mismatches create rollover risk.
| Score | Lease vs ESA tenor |
|---|---|
| 4 | Lease tenor ≥ ESA tenor (25 years); long-term commitment |
| 3 | Lease tenor 15–24 years; covers most of ESA term |
| 2 | Lease tenor 10–14 years; ESA renewal risk in second half |
| 1 | Lease tenor 5–9 years; significant renewal risk |
| 0 | Lease tenor < 5 years or expiring within 12 months |
Criterion 4: Industry stability (0–4 points)
Per G.2 industry-tier proxy table, with adjustment for tenant-specific signals.
Criterion 5: Jurisdiction and operational stability (0–4 points)
| Score | Profile |
|---|---|
| 4 | Thai-incorporated subsidiary of OECD parent; multi-decade Thai operations; no jurisdiction concerns |
| 3 | Thai-incorporated; either Thai parent or international parent; established operations |
| 2 | Thai-incorporated; parent in jurisdiction with mild trade or financial concerns |
| 1 | Thai-incorporated; parent in jurisdiction with significant concerns (sanctions risk, capital controls) |
| 0 | Jurisdiction concerns prohibit ESA execution |
G.1.3 Score aggregation¶
Raw score = sum of five criteria (max 20).
| Raw score | Final grade |
|---|---|
| 17–20 | A |
| 12–16 | B |
| 7–11 | C |
| ≤ 6 | D |
G.1.4 Grade overrides¶
The grading framework allows two override conditions:
- Adverse signal override: any tenant with active litigation against the JV partner, recent material adverse event (regulatory enforcement, environmental claim, criminal investigation), or pending bankruptcy filing → downgraded one notch regardless of score.
- Insurance / collateral upgrade: tenant providing collateral (parent guarantee, security deposit, irrevocable LC) covering ESA value at 1.25× → upgraded one notch.
Overrides are documented in the per-tenant grading record with rationale.
G.2 Industry-tier proxy table¶
For tenants without public credit ratings (most Thai industrial tenants), the methodology uses an industry-tier proxy. The proxy informs Criterion 4 (industry stability) and contextualises Criterion 1 where group financials are thin.
G.2.1 Industry tier mapping¶
| Industry tier | Examples (typical at IEAT estates) | Default proxy score (Criterion 4) |
|---|---|---|
| Tier-A industries | Automotive (Tier-1 OEM and OEM subsidiaries); electronics (semiconductors, optical components); medical devices; aerospace components; cleantech equipment manufacturing | 4 |
| Tier-B industries | Automotive Tier-2 components; chemicals (non-petrochemical); rubber and tyre; food and beverage industrial; precision machinery; logistics and warehousing | 3 |
| Tier-C industries | Petrochemicals; basic chemicals; cement and construction materials; metals processing; textiles (technical); plastics | 2 |
| Tier-D industries | Textiles (basic); paper and packaging; basic food processing; consumer goods assembly; agricultural processing | 1 |
| Tier-E (avoid) | Commodity goods; speculative new ventures; sectors with recent multi-firm distress | 0 |
G.2.2 Industry-tier adjustments¶
Five adjustments to the base industry score:
- OEM vs subsidiary: Tier-1 OEMs (direct manufacturer) typically more stable than Tier-⅔ component suppliers. OEM-direct → +0; Tier-2 subsidiary → −1; Tier-3 → −2.
- Recent macro shock: industries with recent sector-wide distress (COVID-era hospitality, 2024 chip-cycle electronics) → adjust ±1 per macro signal.
- EV transition: ICE-vehicle suppliers with limited EV transition → −1 (downside automotive sub-sector adjustment).
- Greenfield vs brownfield: established operations > 10 years at IEAT → +0; new entrants < 5 years → −1.
- Co-location synergy: tenant whose operations have direct synergy with PV deployment (e.g., factory with daytime load profile matching PV generation) → +0 (no adjustment; already baked into Criterion 3 lease alignment).
G.2.3 Estate-level industry mix observation¶
Each estate has a characteristic industry mix that affects the per-tenant grading distribution. For LC (illustrative, [PENDING WP4 validation]):
| Industry | LC tenant count | Tier proxy |
|---|---|---|
| Automotive Tier-½ | ~30% of tenants | Tier-A / B mix |
| Electronics | ~20% | Tier-A |
| Rubber / tyre | ~15% | Tier-B |
| Chemicals / petrochemicals | ~10% | Tier-C |
| Logistics | ~10% | Tier-B |
| Other industrial | ~15% | Tier-B / C mix |
[PENDING WP4] — exact distribution to be verified against the LC tenant inventory (lc_tenants_v3.csv, 128 verified tenants) by Benedikt + analyst in Weeks 5–8.
G.3 Concentration treatment¶
G.3.1 Group-level aggregation rules¶
When multiple tenant-attributed segments map to the same group parent, they are aggregated for concentration purposes:
- Wholly-owned subsidiaries (>50% direct ownership): aggregate to parent
- Significant subsidiaries (20–50% ownership): partial aggregation (50% weight)
- Affiliated entities (cross-shareholding, joint ventures): per-case assessment
LC has a known concentration: Thai Summit Group owns three subsidiaries with adjacent T6W canal canopy segments (LC-T6W-01, LC-T6W-02 first and second segments) totalling 7.85 MWp / $5.74M — 22% of LC envelope by CAPEX.
G.3.2 Concentration thresholds¶
| Concentration metric | Threshold | Action |
|---|---|---|
| Single group share of envelope CAPEX | > 25% | Concentration risk flag; require enhanced credit work + replacement plan |
| Single group share of envelope CAPEX | 15–25% | Elevated risk flag; sensitivity test (cluster-out scenario) required |
| Single group share of envelope CAPEX | 10–15% | Standard risk flag; documented in IC paper |
| Single group share of envelope CAPEX | < 10% | No special treatment |
| Top-3 group concentration | > 50% | Portfolio concentration flag; consider diversification across estates |
LC's Thai Summit Group at 22% sits in the elevated risk flag band — already addressed in the LC model's Tenant_Consent_Sensitivity tab.
G.3.3 Stress scenarios¶
For any concentrated cluster, the financial model must include:
- Single-tenant default scenario within the cluster — assesses correlation
- Cluster-out scenario — full cluster exits ESA; revenue lost; envelope reduced
- Cluster-haircut scenario — cluster signs ESA but at lower tariff (negotiation pressure scenario)
LC Thai Summit cluster-out per the LC model: 1.04× DSCR (vs 1.42× base) / 11.4% IRR (vs 12.2% base) / BREACH — methodology classifies this as a deal-fragility signal that must be mitigated.
G.3.4 Mitigations¶
Four mitigation paths for concentrated cluster risk:
- Reserve typology replacement — methodology has T1X/T2X/T6X reserves for tenant-consent replacement. LC's T6X reserve is 1.5 MWp / $1.10M — insufficient to replace 7.85 MWp Thai Summit cluster fully but covers ~14%
- Collateral / parent guarantee — require group-level parent guarantee for cluster ESAs (Criterion 5 override upgrade)
- Re-attribution to IEAT-direct — where physically possible (segment is on or adjacent to IEAT property), re-attribute as IEAT-direct
- Cluster-specific insurance — political risk / commercial credit insurance covering the cluster (cost typically 0.5–1.5% of ESA NPV per annum)
The methodology recommends combining (1) and (2) where feasible; (3) and (4) where the cluster is structurally critical.
G.4 Application to LC's 12 Tier-1 anchors¶
G.4.1 LC Tier-1 anchor list (per Part B § B.8)¶
| # | Tenant | Group / parent | Industry | Adjacent segments | Cluster |
|---|---|---|---|---|---|
| 1 | Michelin Siam Company | Michelin (FR) | Rubber / tyre | LC-T2-04, LC-T2-07 | — |
| 2 | MMTh Engine Co. | Mitsubishi Motors (JP) | Automotive Tier-1 | LC-T4B-01 | — |
| 3 | Thai Summit Harness PCL | Thai Summit Group (TH) | Automotive Tier-2 | LC-T6W-01 | Thai Summit |
| 4 | Multibax Public Co. | (TH, public) | Plastics / industrial | LC-T1 / T4A | — |
| 5 | Astemo Chonburi Manufacturing | Hitachi Astemo (JP) | Automotive Tier-1 | LC-T4B-03 | — |
| 6 | Siam Compressor Industry | Mitsubishi Electric (JP) | Electronics (HVAC components) | LC-T4B-05 | — |
| 7 | Summit Auto Body Factory | Thai Summit Group (TH) | Automotive Tier-2 | LC-T6W-02 (part) | Thai Summit |
| 8 | Kimball Electronics (Thailand) | Kimball (US) | Electronics | LC-T4B-07 | — |
| 9 | Summit Laemchabang Auto Body | Thai Summit Group (TH) | Automotive Tier-2 | LC-T6W-02 (part) | Thai Summit |
| 10 | Techno-Metal | (TH) | Metals processing | LC-T4B-09 | — |
| 11 | Sankyu Laem Chabang (Thailand) | Sankyu (JP) | Logistics / industrial services | LC-T1-10 | — |
| 12 | Laem Chabang 2 Power Plant | (TH, power producer) | Power generation | LC-T6W-03 (special case) | — |
G.4.2 Per-tenant grades¶
[PENDING WP4 — Weeks 5–8]
The grading framework (G.1) and industry proxy (G.2) applied to each of the 12 Tier-1 anchors produces:
| # | Tenant | Parent rating | Subsidiary cap | Lease/ESA | Industry | Jurisdiction | Raw score | Grade |
|---|---|---|---|---|---|---|---|---|
| 1 | Michelin Siam | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 2 | MMTh Engine | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 3 | Thai Summit Harness | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 4 | Multibax | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 5 | Astemo Chonburi | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 6 | Siam Compressor | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 7 | Summit Auto Body | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 8 | Kimball Electronics | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 9 | Summit LC Auto Body | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 10 | Techno-Metal | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 11 | Sankyu LC | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] |
| 12 | LC2 Power Plant | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING] | [PENDING — special case, power-producer ESA] |
Provisional grading expectations (illustrative, to be validated by WP4): - Anchors with major OECD multinational parents (Michelin, Mitsubishi Motors, Hitachi Astemo, Mitsubishi Electric, Kimball, Sankyu): likely A grade - Multibax (public on SET): likely A or B grade depending on financials - Thai Summit Group entities: likely B grade individually; concentration aggregation per G.4.3 - Techno-Metal (Thai privately-held): likely B or C grade depending on financials - LC2 Power Plant: special case requiring legal treatment beyond grading (per Part D § D.4.6)
G.4.3 LC concentration profile [PENDING WP4]¶
Pre-aggregation: 12 anchors across 3 clusters (Thai Summit 3 entities; remaining 9 standalone)
Post-aggregation: - Thai Summit Group: 22% of envelope CAPEX → elevated risk band (per G.3.2) - All other anchors: < 10% each → no concentration flag
[PENDING WP4 — apply G.3.4 mitigation framework to Thai Summit cluster]
G.4.4 Thai Summit Group cluster treatment¶
The Thai Summit Group cluster is the binding concentration constraint at LC. Methodology recommends:
- Pursue group-level parent guarantee from Thai Summit Group Plc (parent) covering the three subsidiary ESAs at 1.25× ESA NPV (Criterion 5 override upgrade for the cluster)
- Hold T6X reserve as partial replacement option (1.5 MWp / $1.10M; covers ~14% of cluster CAPEX)
- Document cluster-out stress scenario in IC paper — already in LC model (1.04× DSCR / 11.4% IRR / BREACH)
- Sequence LOI campaign Thai-Summit-first — early commitment locks the cluster (per G.6)
WP4 confirms or revises this approach based on Thai Summit Group's actual financial profile and parent-guarantee willingness.
G.5 Treatment in financial model¶
G.5.1 Probability-of-default mapping¶
Each grade maps to a 25-year cumulative PD:
| Grade | 25-yr cumulative PD | Annualised hazard rate |
|---|---|---|
| A | 5% | ~0.20%/yr |
| B | 10% (mid-range) | ~0.42%/yr |
| C | 22% (mid-range) | ~0.99%/yr |
| D | 45% (mid-range) | ~2.40%/yr |
G.5.2 Expected loss per ESA¶
Expected loss (EL) per ESA = PD × LGD × EAD where: - PD: probability of default from G.5.1 - LGD (loss given default): typically 0.40–0.60 for tenant ESAs (assumes some recovery via collateral or replacement tenant) - EAD (exposure at default): per-year ESA revenue × remaining ESA term
For LC's 12 anchors at v1.0 baseline (no per-tenant credit-adjusted revenue), the model is implicitly assuming PD = 0 for Tier-1 anchors. With G.5 applied: aggregated EL per anchor × 12 anchors, discounted to NPV, becomes a credit-adjusted revenue line.
[PENDING WP4 — quantify the LC credit-adjusted revenue impact]
G.5.3 Aggregate portfolio risk¶
Beyond per-tenant EL, the methodology tracks two portfolio-level metrics:
- Tail risk concentration: probability of multiple correlated defaults (cluster-out scenario)
- Weighted average grade: portfolio-level credit quality summary; useful for KTB IE and Fund I LP reporting
For LC [PENDING WP4]: - Weighted average anchor grade: likely A− (A grades dominant, B grades from Thai Summit cluster) - Tail risk: dominated by Thai Summit cluster scenario; mitigated per G.4.4
G.6 LOI campaign integration¶
G.6.1 Grade-informed sequencing¶
Tier-1 anchor LOI campaigns (per Part E § E.4.6) target 70%+ Tier-1 LOI signing pre-IC. Annex G informs which anchors to pursue first:
- Cluster anchors first: Thai Summit Group cluster anchors prioritised (locks the binding concentration constraint)
- A-grade non-cluster anchors next: high-confidence commitments build LOI momentum
- B-grade anchors third: more negotiation needed
- C-grade anchors last (if pursued at all): may be replaced from reserve
G.6.2 LOI terms by grade¶
| Grade | LOI structure | Negotiation latitude |
|---|---|---|
| A | Standard methodology terms (tariff THB 3.85 flat; 25-year tenor; no escalation) | Minimal |
| B | Standard terms with possible parent-guarantee request | Negotiable on collateral |
| C | Standard terms with parent-guarantee required OR tenant-direct ESA only if tenant has collateral | Limited |
| D | Tenant not pursued for ESA; segment re-attributed or replaced | Not applicable |
G.6.3 LOI conversion expectations¶
Methodology assumes the following LOI conversion rates (Tier-1 candidates → signed LOIs):
| Grade | LOI conversion rate | Rationale |
|---|---|---|
| A | 80–95% | Standard terms easy to negotiate |
| B | 60–75% | Parent guarantee or other terms may slow |
| C | 40–60% | Multiple negotiation friction |
| D | < 30% | Often replaced from reserve before pursuing |
LC's 12-of-12 LOI conversion (per LC IC paper) implicitly assumed A/B grade distribution; the Annex G framework will quantify this retrospectively.
G.7 Acknowledged Annex G gaps¶
- Per-tenant grades pending WP4 — the framework is locked in v1.1.0 but the per-tenant application to LC's 12 anchors requires WP4 work (Weeks 5–8)
- LGD calibration is methodology default 0.40–0.60 — not estate-specific; v1.2 refinement against historical recoveries
- Correlation modeling between anchors — methodology assumes independent defaults plus explicit cluster aggregation; pairwise correlation not modeled; v1.2 refinement
- Annual recalibration of PD ranges — Part F § F.4 includes industry-tier proxy refresh; PD mapping refresh on annual cadence
- Tier-2 and Tier-3 grading — Annex G is written for Tier-1 anchor grading; Tier-2 (identified but not investment-grade) and Tier-3 (inferred) may benefit from similar framework; deferred to v1.2
- International parent guarantee enforceability — collateral upgrade (G.1.4 override) assumes enforceable parent guarantee; cross-border enforcement specifics not in Annex G; per-case legal review
G.8 References¶
- NC-IC-LC-001 IC Paper v1.1 — LC 12 Tier-1 anchor list
- NC-FM-LC-001 LC Financial Model v1.0 — Tenant_Consent_Sensitivity tab
- NC-IS-LC-001 LC Investment Segment Register v1.0 — per-segment tenant attribution
- NC-METH-001 v1.1.0 Part B § B.8 — tier assignment
- NC-METH-001 v1.1.0-revA Part C § C.5.6 — Thai Summit Group concentration
- NC-METH-001 v1.1.0 Part D § D.7 — financial structure
- NC-METH-001 v1.1.0 Annex J — AUDIT-027 closure tracking
- DBD Thailand business registry (Thai-incorporated tenant financials)
- S&P Capital IQ (international parent ratings)
- Industrial sector default historical data (2000–2024)
- Memory edits 1–30 (per
memory_user_edits view12 May 2026)
End of Annex G v1.1.0 framework lock.
Per-tenant grades pending: WP4 closure (Weeks 5–8).