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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's affirms REE's Baa1 ratings, stable outlook

22 Jan 2020

Paris, January 22, 2020 -- Moody's Investors Service, (Moody's) has today affirmed Red Eléctrica de España S.A.U. (REE)'s Baa1 issuer rating and the Baa1/(P)Baa1 senior unsecured guaranteed debt ratings of REE's financing affiliates. The outlook remains stable for all ratings.

The rating action follows the implementation in January of the tariff structure for the new 2020-2025 regulatory period as per the final determination of the Spanish regulator, the CNMC.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

The affirmation of REE's Baa1 ratings reflects Moody's assessment that, following the start of the new regulatory period, REE's revenues for electricity transmission in Spain will continue to support credit metrics commensurate with guidance for the current rating, with funds from operations (FFO)/net debt and retained cash flow (RCF)/net debt above the mid-teens and high single digits in percentage terms, respectively.

On 19 December, the Spanish regulator CNMC approved the final tariff methodology applicable to regulated electricity transmission for the five-year regulatory period that commenced in January 2020. The regulator determined that revenues for transmission activities would drop by 7.3% across the period, driven by (1) lower allowed returns of 6.00% and 5.58% during 2020 and 2021-25 respectively, down from 6.5% in the prior regulatory cycle; and (2) the full amortization of pre-1998 assets from 2024 onwards. While the changes will reduce REE's regulated revenues, Moody's anticipates that FFO to Net Debt will remain above the mid-teens in percentage terms during the period, also supported by other revenues derived from recent acquisitions in Hispasat and international transmission assets.

In addition, REE's credit profile continues to be supported by: (1) it's monopoly position as Spain's system operator and owner of electricity transmission assets; (2) a largely predictable cash flow profile underpinned by the dominant portion of revenues derived from the regulated domestic transmission business; and (3) the developing track record of the regulatory framework in Spain, recently evidenced by the independent role of CNMC in the design and implementation of the new 2020-25 regulatory framework.

REE's planned acquisition of a 50% equity stake in Argo Energia, announced in November 2019 and representing a EUR382 million investment, shortly after the acquisition of Hispasat evidences an increased appetite for acquisitions. However, the to be acquired assets are consistent, in terms of size and business profile, with the company's business strategy for 2018-2022. Going forward, Moody's expects REE to pursue more acquisitions outside of its core Spanish regulated business, albeit of smaller magnitude and on a selective basis such as to (i) maintain its ability to distribute dividends and (ii) keep its net debt to EBITDA ratio in levels of 4x in line with stated guidance.

As a result of its 20% ownership by SEPI (Sociedad Estatal de Participaciones Industriales), a state company of Industrial participations of the government of Spain (Baa1 stable), REE is considered a government related issuer (GRI) but receives no ratings uplift from its baa1 BCA.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook reflects Moody's view that REE's business mix and financial profile will continue to support a credit profile aligned with a Baa1 rating with FFO/ net debt and RCF/net debt above the mid-teens and high single digits in percentage terms, respectively.

WHAT COULD MOVE THE RATING UP/DOWN

While positive ratings pressure is not currently expected, REE's ratings could be upgraded should the group demonstrate a strengthening of its financial profile such that FFO/net debt remains well above 20% and RCF/net debt in the low teens in percentage terms.

Conversely, REE's ratings could be downgraded if the company's financial profile were to deteriorate below Moody's current expectations — as a result of (1) investments beyond current expectations, which are not supported by commensurate balance-sheet strengthening; (2) increased shareholder distributions; or (3) adverse regulatory developments — such that FFO/net debt and RCF/net debt appeared likely to fall persistently below guidance for the current rating i.e. FFO/ net debt and RCF/net debt above the mid-teens and high single digits in percentage terms, respectively

The methodologies used in these ratings were Regulated Electric and Gas Networks published in March 2017, and Government-Related Issuers published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

LIST OF AFFECTED RATINGS

Affirmations:

..Issuer: Red Electrica de Espana Finance B.V.

....BACKED Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa1

..Issuer: Red Electrica de Espana, S.A.U.

.... LT Issuer Rating, Affirmed Baa1

..Issuer: Red Electrica Financiaciones, S.A.U.

....BACKED Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa1

....BACKED Senior Unsecured Regular Bond/Debenture , Affirmed Baa1

Outlook Actions:

..Issuer: Red Electrica de Espana Finance B.V.

....Outlook, Remains Stable

..Issuer: Red Electrica de Espana, S.A.U.

....Outlook, Remains Stable

Red Electrica Financiaciones, S.A.U.

....Outlook, Remains Stable

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Items color coded in purple in this Press Release relate to unsolicited ratings for a rated entity which is non-participating.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Paco Debonnaire
AVP - Analyst
Infrastructure Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Neil Griffiths-Lambeth
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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