London, 16 July 2012 -- Moody's Investors Service has today announced multiple rating actions
on the following Italian utility and infrastructure issuers: Atlantia
S.p.A., Snam S.p.A.,
Terna S.p.A., SIAS -- Società Iniziative
Autostradali e Servizi S.p.A., Acea S.p.A.,
Hera S.p.A. and Compagnia Valdostana delle Acque
S.p.A.
Today's rating action on these issuers follows the weakening of the Italian
government's creditworthiness, as captured by Moody's downgrade
of Italy's government bond ratings to Baa2, on 13 July 2012.
For more details on the rationale for the sovereign downgrade, please
refer to the press release http://www.moodys.com/research/Moodys-downgrades-Italys-government-bond-rating-to-Baa2-from-A3--PR_250567.
The ratings of Enel and its Spanish subsidiary Endesa, Edison S.p.A.,
A2A S.p.A. and Aeroporti di Roma S.p.A.
and its subsidiary Romulus Finance Srl are unaffected by the change in
sovereign creditworthiness. An overview of unaffected issuers is
provided later on in this press release.
-- OVERVIEW OF AFFECTED ISSUERS:
- ATLANTIA S.P.A.: The senior unsecured
debt ratings and the EUR10 billion medium-term note (EMTN) programme
rating have been downgraded to Baa1/(P)Baa1 from A3/(P)A3, respectively.
The outlook on the ratings is negative.
- SNAM S.P.A.: The Baa1 issuer rating
has been placed on review for downgrade, as have the provisional
(P)Baa1 ratings assigned SNAM's: (1) EUR8 billion EMTN programme,
(2) EUR6 billion bridge-to-bond facility, (3) EUR2
billion revolving credit facility, (4) EUR1.5 billion revolving
credit facility, and (5) EUR1.5 billion term loan facility.
- TERNA S.P.A.: The issuer rating and
the senior unsecured debt ratings have been downgraded to Baa1 from A3,
while the EUR5 billion EMTN programme has been downgraded to (P)Baa1 from
(P)A3. The outlook on the ratings is negative. Terna's
short-term Prime-2 rating is unchanged.
- SIAS - SOCIETÀ INIZIATIVE AUTOSTRADALI E SERVIZI
S.P.A.: Moody's has changed to negative
from stable the outlook on SIAS's Baa2 senior secured rating and
(P)Baa3 senior unsecured rating.
- ACEA S.P.A.: The issuer rating has
been downgraded to Baa2 from Baa1. The rating remains on review
for further downgrade.
- HERA S.P.A.: The Baa1 issuer rating
and senior unsecured debt ratings have been placed on review for downgrade,
as has the (P)Baa1 rating on Hera's EUR1.5 billion EMTN programme.
- COMPAGNIA VALDOSTANA DELLE ACQUE S.P.A.:
The issuer rating has been downgraded to Baa1 from A3. The outlook
on the rating is negative.
RATINGS RATIONALE
The above actions were triggered by the downgrade of Italy's government
bond ratings. Given the multiple channels of contagion that exist
between sovereign and corporate issuers, it is challenging for even
strong utilities and infrastructure companies with defensive characteristics
to achieve a rating that is more than one or two notches higher than that
of the sovereign rating in which they are domiciled. For more details,
please refer to Moody's February 2012 Rating Implementation Guidance
"How Sovereign Credit Quality May Affect Other Ratings."
- ATLANTIA
The downgrade of Atlantia's ratings to Baa1 from A3 positions the
company one notch above the Italian sovereign's rating. As
Italy's largest toll roads operator, Atlantia's earnings
are predominantly generated domestically, which in turn means that
the company cannot fully insulate itself from the macroeconomic risks
associated with a weakened sovereign, as indicated by the recent
deteriorating traffic trends recorded on Atlantia's Italian network
(-8.5% in Q1 2012). At the same time,
the one-notch rating differential with the sovereign is supported
by (1) Atlantia's comfortable liquidity profile and diversified
debt structure, which mitigates the company's vulnerability
to potential tensions in the debt markets for Italian issuers over the
short to medium term; and (2) the expected increase in its exposure
to international operations. However, this exposure is partially
mitigated by Moody's expectation that the contribution to Atlantia's
cash flows from its foreign activities will be very limited over the medium
term, and that some of the company's international subsidiaries
are characterised by the presence of significant minority interests.
More generally, in addition to a continued strong liquidity profile,
Atlantia's rating positioning vs. the sovereign rating is
based on the expectation of regulatory stability in this sector in Italy
and that the company will not be subject to political interference and/or
discriminatory fiscal measures. Evidence of significant exposure
to these risks beyond current expectations could result in negative pressure
on Atlantia's rating.
The negative outlook on Atlantia's rating is in line with the outlook
on the sovereign rating. This reflects Atlantia's continuing
exposure to the deteriorating economic situation within the country and
the potential pressures that this could exert on the company's financial
and business risk profile. Any downward migration in the Italian
sovereign rating would likely result in a corresponding adjustment of
Atlantia's rating. Given the linkages between Atlantia's
rating and that of the government, an upward move in the sovereign
rating would be required before Atlantia would become eligible for a rating
upgrade.
- SNAM
Moody's initiation of a review for downgrade for SNAM's Baa1
ratings reflects the company's close linkages with the sovereign,
in light of the fact that all its earnings are generated in Italy.
Whilst recognising the company's strategic position in the transmission,
distribution, storage and regasification of natural gas in Italy,
its important role in executing on the country's energy plan and
its fully regulated profile, Moody's also notes the relatively
short average maturity of SNAM's debt and its sizeable refinancing
needs. In Moody's view, these factors make the company
particularly exposed to the potentially more challenging market conditions
associated with the deterioration of the sovereign and macroeconomic environment
in Italy, and thus particularly vulnerable to increasing funding
costs and tensions related to access to debt markets for Italian issuers.
In light of these considerations, Moody's had previously indicated
that SNAM's rating was unlikely to be positioned above the sovereign
rating in the event of further downward pressure on the latter.
However, in this context, the rating agency notes the progress
made by the company in the refinancing of its debt maturities, following
the recent cumulative issuance of EUR2 billion of bonds.
As part of its review, Moody's will consider whether SNAM's
ratings could be confirmed at the current level and therefore potentially
be positioned above that of the sovereign. This would depend on
any potential near-term debt issuance by SNAM, aimed at further
extending its debt maturity profile significantly, and thereby mitigating
its sizeable refinancing needs over the medium term. Moody's
could downgrade SNAM's rating if the company were unable to improve
its liquidity profile and extend the average maturity of its debt.
-TERNA
The downgrade of Terna's rating to Baa1 positions the company one
notch above the sovereign, in line with Moody's previous guidance
for the company. The rating differential reflects Terna's
(1) strategic position as owner and operator of Italy's electricity
transmission assets; (2) focus on regulated activities and its important
role in delivering the country's energy plan; (3) comfortable
liquidity profile; (4) diversified debt structure; and (5) moderate
debt maturities over the medium term. However, at the same
time, the rating also reflects Terna's close linkages with
the sovereign, given the fact that all its earnings are generated
in Italy, and the company's exposure to financial and macroeconomic
uncertainties in the country. In light of these considerations,
Terna's rating differential with the sovereign is limited to one
notch. More generally, in addition to a continued strong
liquidity profile, Terna's rating positioning vs. the
sovereign rating is based on the expectation of regulatory stability in
the sector in Italy and that the company will not be subject to political
interference and/or discriminatory fiscal measures. Evidence of
a significant exposure to these risks beyond current expectations could
result in negative pressure on Terna's rating.
The negative outlook on Terna's rating is in line with that of the
sovereign, reflecting the company's continuing exposure to
the deteriorating economic situation in the country and the potential
pressures that this could exert on the company's financial and business
risk profile. Any downward move in the Italian sovereign rating
would likely result in a corresponding adjustment of Terna's rating.
Given the linkages between Terna's rating and that of the government,
an upward move in the sovereign rating would be required before Terna
would become eligible for a rating upgrade.
-SIAS
The change in the outlook on SIAS's Baa2 senior secured ratings
and (P)Baa3 senior unsecured ratings to negative from stable reflects
the general vulnerability of the company to the macroeconomic risks associated
with a weaker sovereign, as indicated by the recent deteriorating
traffic trends recorded on SIAS's Italian toll roads network (-7.3%
in Q1 2012). SIAS's consolidated credit quality is currently
positioned at the same level as the sovereign rating. Moody's
believes that the company's rating could potentially exceed that
of the Italian sovereign in the event that moderate downward pressure
were to materialise on the latter, particularly in light of SIAS's
solid liquidity profile and limited debt refinancing requirements over
the medium term. However, the negative outlook, which
is in line with that of the sovereign, reflects the potential transition
risk associated with SIAS's current rating positioning, in
the context of the event risk characterising the Italian rating and its
vulnerability to economic and financial shocks as a result of the euro
area crisis. Moody's notes that, going forward,
a key factor in the context of any potential reassessment of SIAS's
rating positioning will be clarity around the company's use of material
accumulated cash balances, partially deriving from the recent disposal
of its international investments. Negative pressure on SIAS's
rating would develop in the event of a further material weakening of the
sovereign and macroeconomic environment in Italy. Given the linkages
between SIAS's rating and that of the government, a stabilisation
or an upward move in the sovereign rating would be required before SIAS
would become eligible for a rating upgrade.
-ACEA
The downgrade of Acea's rating to Baa2, in line with the sovereign
rating, reflects the majority ownership by the city of Rome and
the fact that its earnings are entirely generated in Italy. The
downgrade of Acea's rating also reflects the negative evolution
of the company's financial performance and the recent deterioration
in its key credit metrics. These factors confirm the company's
exposure to the general macroeconomic pressures associated with a weaker
sovereign environment.
More specifically, despite the largely regulated nature of Acea's
earnings, these linkages have resulted in a negative working capital
evolution, mainly related to the company's exposure to overdue
receivables vs. the public sector and the city of Rome.
The company's negative working capital trends have been further
exacerbated by the recent delays in invoicing electricity clients due
to problems with the introduction of a new billing system. In addition,
Acea's financial performance continues to be negatively affected
by the uncertainties surrounding the recovery of outstanding amounts in
respect of two of its water subsidiaries, mainly as a result of
their persistent inability to reach an agreement in respect of applicable
tariff increases. In Moody's view, the negative macroeconomic
trends affecting Acea's operating environment could constrain the
company's ability to reverse the negative working capital trends
and prevent it from strengthening its credit metrics, at a time
when the company has also experienced the departure of members of its
management team. In addition, with regard to Acea's
liquidity position, Moody's notes that the company is in part
reliant on uncommitted lines for the coverage of working capital needs.
This could potentially result in the company coming under additional pressure
in the context of the more challenging funding environment.
As part of its review, Moody's will take into account any
measure implemented by the company to address the recent negative developments
and strengthen its financial and liquidity profile. Moody's
could downgrade Acea's rating in the event that the company makes
no material progress in executing measures to support the stabilisation
of its financial and liquidity profile.
-HERA
Moody's initiation of a review for downgrade for Hera's Baa1
rating reflects the company's close linkages with the sovereign,
given that all its earnings are generated in Italy and its consequent
exposure to the macroeconomic risks associated with a weaker sovereign.
Notwithstanding the regulated nature of a material portion of Hera's
earnings, Moody's notes that the company exhibits elements
of cyclicality, particularly in the context of its presence in the
waste segment, its exposure to potentially adverse working capital
trends and in light of its exposure to the public sector. However,
Moody's also notes Hera's good liquidity arrangements and
moderate debt maturity profile.
As part of its review, Moody's will consider the potential
for Hera's rating to be positioned above that of the sovereign.
In doing so, the rating agency will take into account the company's
ability to partially delink from the sovereign risk through the stabilisation
of its financial profile and the maintenance of strong liquidity arrangements.
Moody's could downgrade the rating if the rating agency concludes
that Hera's financial and liquidity profile, under stressed
scenarios, does not enable the company to partially delink itself
from the sovereign risk. As part of its review, Moody's
will also consider any potential impact on Hera's business and financial
risk profile as a result of the company's recently announced intention
to consider a merger with the multi-utility Acegas-Aps.
-CVA
The downgrade of CVA's rating to Baa1 reflects the company's
vulnerability to the macroeconomic risks associated with a weaker sovereign,
particularly in light of its relatively small size, its niche position
in the Italian electricity market and the fact that all its earnings are
generated in Italy. However, the fact that CVA's rating
is one notch above that of the sovereign mainly reflects CVA's material
cash availability and additional flexibility deriving from investments
of its excess liquidity, in the context of a predominantly amortising
long term debt profile which would partially insulate the company from
potential tensions in the debt markets for Italian issuers over the medium
term.
The negative outlook assigned to CVA's rating is in line with the
outlook on the sovereign rating. This reflects CVA's continuing
exposure to the deteriorating economic situation in Italy and the potential
pressures that this could exert on the company's financial and business
risk profile. Any downward move in the Italian sovereign rating
would likely result in a corresponding adjustment of CVA's rating.
Given the linkages between CVA's rating and that of the government,
an upward move in the sovereign rating would be required before CVA would
become eligible for a rating upgrade.
OVERVIEW OF UNAFFECTED ISSUERS
- ENEL AND ITS SPANISH SUBSIDIARY ENDESA: The senior unsecured
Baa1 ratings of Enel S.p.A. and its guaranteed subsidiaries,
the Baa1 ratings of Endesa's guaranteed subsidiaries and the Prime-2
ratings of Enel Finance International N.V., Endesa
S.A. and International Endesa B.V remain on review
for downgrade, where they were placed following the downgrade of
the Government of Spain to Baa3 on 13 June.
- EDISON S.P.A.: The Baa3 issuer and
senior unsecured ratings and their negative outlook remain unchanged.
- A2A S.P.A.: The Baa2 issuer and senior
unsecured debt ratings remain on review for downgrade, where they
were placed on 31 May.
- AEROPORTI DI ROMA S.P.A. AND ITS AFFILIATE
ROMULUS FINANCE SRL: The Ba2 debt ratings and their positive outlook
remain unchanged.
Moody's will comment separately on the ratings of Acquedotto Pugliese
S.p.A. as the company's ratings incorporate
some uplift for support from its sub-sovereign owner (Region of
Puglia).
PRINCIPAL METHODOLOGIES
The principal methodology used in rating Atlantia and SIAS was the Operational
Toll Roads rating methodology, published in December 2006.
The principal methodology used in rating Terna and SNAM was the Regulated
Electric and Gas Networks rating methodology, published in August
2009.
The principal methodology used in rating CVA was the Unregulated Utilities
and Power Companies rating methodology, published in August 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Moody's determined Acea's and Hera's ratings by evaluating
factors that it considers relevant to the credit profile of the issuers,
such as their (1) business risk and competitive position compared with
others within the industry; (2) capital structure and financial risk;
(3) projected performance over the short to medium term; and (4)
management's track record and tolerance for risk. Moody's
compared these attributes against other issuers both within and outside
Acea's and Hera's core industry, and believes that the
ratings of the two companies are comparable to those of other issuers
with similar credit risk.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entities or their designated
agents and issued with no amendment resulting from that disclosure.
Information sources used to prepare the ratings are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entities or their related third parties within
the two years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided
to entities rated by MIS's EU credit rating agencies" on the
ratings disclosure page on our website www.moodys.com for
further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Raffaella Altamura
Analyst
Infrastructure Finance
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Monica Merli
MD - Infrastructure Finance
Infrastructure Finance
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's takes action on certain Italian utility and infrastructure companies following sovereign downgrade
