New York, May 13, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 6 May 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
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This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Communications Infrastructure published in February 2022. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Communications Infrastructure
Scale: Scale can indicate a company's ability to influence business trends and pricing within its segments and to support a stable or growing market position. Scale can influence resilience to changes in demand or exogenous events, such as natural disasters, macroeconomic shocks, regional disruptions, or technological change. Revenue is an indicator of scale.
Business Profile: The business profile of a communications infrastructure company provides indications of the strength or weakness of its business model based on whether it owns or leases assets, its product and service offering, and the exclusivity of the location of its infrastructure. A communications infrastructure company's competitive environment and business conditions, including the stability and tenor of its contracts, also affects its ability to generate cash flow and raise external capital. Barriers to entry and long-term contracts with strong counterparties can foster stable cash flows. The degree of competition a company faces directly affects its pricing power and marketing expenses. Reliability, product differentiation, execution and competitive cost structures are also considerations.
Profitability and Efficiency: Profits are necessary in order for a company to reinvest in its business and maintain a competitive position, and sustained high profitability generally indicates a substantial competitive advantage. Funds from Operation(FFO) Margin, which is the ratio of FFO to revenue, is an indicator of profitability.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability, including its ability to generate sufficient returns to maintain access to the capital markets. Given the capital intensity of the industry, companies that are able to finance projects with internally generated cash flow and external sources have an inherent advantage. Among others, ratios such as EBITDA minus Capital Expenditures/ Interest, Free Cash Flow/ Debt, and Debt/ EBITDA are indicators of leverage and coverage.
Financial Policy: Management and board tolerance for financial risk is considered because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. The company's desired capital structure or targeted credit profile, its history of prior actions, including its track record of risk and liquidity management, use of cash flow through different phases of economic and industry cycles, and its adherence to its commitments can serve as indicators of financial policy.
Other Considerations: Other consideration can include, but are not limited to, financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• Broadcast Australia Finance Pty Limited
The principal methodology used for these rated entities was Generic Project Finance Methodology published in January 2022. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Generic Project Finance Methodology
Size and Market Profile: Metrics may include but are not limited to scope of operations as measured by operating revenue or usage volume (such as annual ridership or traffic volume) and service area population, network, project or facility size, physical limitations on types of services which can be provided and ease of expansion; strategic positioning exhibited by pricing power, competitive profile including proximity to competing facilities and sustainability of such competitiveness, monopoly position, essentiality of an asset to users, ability to generate demand based on strength and size of service area; capital investment funding and flexibility, diversity as measured by ratio of single largest revenue source to operating revenue; charter renewal risk, ownership and affiliation; service area wealth, economic diversity, income, size and growth rate as measured by data provided by the US Bureau of the Census, Bureau of Labor Statistics and commercial data vendors (where applicable).
Operating Performance and Risk: Metrics may include but are not limited to annual revenue, 3 year average operating margin, 5 year compound growth rate of operating revenue, stability and predictability of revenues, diversity of revenue from various payors/contributors/ operations; size and trend of operating cash flow margin or EBITDA; service area trend and utilization data, fixed costs as a portion of operating expenditures; measures of historic and expected usage measured by standard deviations of year over year; length of time in operation of asset; historic demand and revenue trends, demonstrated ability and willingness to raise rates and/or economic regulation; complexity of relevant technology; availability of cash flow to fund capital needs, operating performance relative to industry norms; quality of operator & experience with the asset type; strength and commitment of sponsor & likelihood of operational and financial support; protections in the concession and regulatory framework; restrictions on business activities, use of debt and revenue distributions.
Financial Position, Policy and Ownership: Metrics may include but are not limited to amount of cash & investments; days cash on hand; ratio of total cash and investments to operating expenses; debt service coverage; level of self-support; budget flexibility, operating cash flow margin, liquidity to demand debt, liquidity reserves or contractual arrangements. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
Debt Affordability: Metrics may include but are not limited to size and scope of multi-year CIP (capital improvement plan) relative to condition of assets that will rely on debt for funding; ratio of total cash and investments to debt and/or interest payments; ratio of debt to operating revenue; debt service coverage and ratios; ratio of debt to cash flow and to operating revenue; interest coverage metrics and concession life coverage ratios; debt and debt equivalents.
• Australia Pacific LNG Processing Pty Ltd
• Dalrymple Bay Finance Pty Ltd
• North Queensland Export Terminal Pty Ltd
• Rowville Transmission Facility Pty Limited
• Wyuna Water Pty Limited
The principal methodology used for these rated entities was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Government-Related Issuers Methodology
Assigning a Baseline Credit Assessment (BCA): The majority of Government-Related Issuers (GRIs) begin with an assessment of the GRI's standalone strength (i.e. BCA) – its ability to service and repay outstanding debt without recourse to extraordinary support from the supporting government - using the published sector-specific methodology that is most suitable for the predominant activities of the GRI. Our assessment of standalone strength includes any day-to-day support received from the government that can be clearly distinguished from extraordinary support. Support mechanisms, such as an obligation of the government to ensure the GRI's solvency and liquidity, are reflected in the BCA when they are legally or contractually documented.
Government uplift: The GRI's ratings include any uplift due to systemic support and typically focus on three structural factors and three factors explaining the level of the government's willingness to provide support. Structural factors address the legal and quasi-legal aspects of the government's relationship with the GRI and include: (1) guarantees, (2) ownership level and (3) barriers to support. The factors underlying willingness consider the softer connections between the two entities and include (4) the likelihood of government intervention, (5) political linkages and (6) economic importance. Support is determined using a joint default analysis framework which considers an estimate of the likelihood of extraordinary support, an assessment of the credit quality of the supporting government, and default correlation between the two entities.
GRIs without a BCA: In limited instances, it is not possible or meaningful to assign a BCA. The GRI is so inextricably linked to the government that a meaningful standalone BCA cannot be derived. In such cases, a top-down analytical approach is used that chiefly considers the ability and willingness of the government to provide timely support, instead of the usual bottom-up approach of starting with the BCA and then considering uplift towards the government's rating.
• Australian Rail Track Corporation Limited
• Transpower New Zealand Limited
The principal methodology used for these rated entities was Natural Gas Pipelines published in July 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Natural Gas Pipelines
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• AGI Finance Pty Limited
• APT Pipelines Limited
• DBNGP Finance Co Pty Ltd
• Energy Partnership (Gas) Pty Ltd
The principal methodology used for these rated entities was Operational Privately Financed Public Infrastructure (PFI/PPP/P3) Projects Methodology published in June 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Operational Privately Financed Public Infrastructure (PFI/PPP/P3) Projects Methodology
Complexity of Project Operations and Performance Regime: Metrics may include but are not limited to the complexity of the operating and maintenance requirements, complexity of the obligations throughout the asset lifecycle, strength, and clarity of the payment mechanism for revenue recovery, and aspects of the interface with sub-contractors.
Strength of Contractual Arrangements and Relationships and Operational Approach: Metrics may include but are not limited to the robustness of the sub-contract package terms for fixed maintenance and operations; robustness of contract arrangement to manage lifecycle requirements, adequacy of budgeting for fixed maintenance requirements; adequacy of the plan to manage lifecycle requirements; quality of the relationship among key parties; exposure to deductions and other penalties from poor performance, strength of the project off-taker.
Performance and Quality of Sub-Contractor: Metrics may include but are not limited to the track record of performance and strength of the sub-contractor, available security.
Financial Position: Metrics may include but are not limited to minimum and average debt service coverage; absolute fund balance and cash position; budget flexibility; revenue trends; relationship between inflows and outflows, breakeven ratios, risks associated with the need to refinance; additional structure protections and reserves; creditor controls.
• Ancora (OAHS) Pty Limited
• Ancora (RCH) Pty Ltd
• Axiom Education Pty Limited
• Civic Nexus Finance Pty Ltd
• Darwin Cove Convention Centre Pty Limited
• JEM (CCV) Pty Limited
• JEM (NSW Schools II) Pty Limited
• JEM (Southbank) Pty Limited
• Novacare Solutions Partnership
• Plenary Health (Casey) Finance Pty Ltd
• Plenary Justice (SA) Pty Ltd
• Plenary Living (LEAP) Finance Pty Ltd
• RWH Finance Pty Ltd
• Western Liberty Group Finance Pty Ltd
The principal methodology used for these rated entities was Privately Managed Airports and Related Issuers published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Privately Managed Airports and Related Issuers
Size and Market Profile: Metrics may include but are not limited to scope of operations as measured by operating revenue or usage volume (such as annual ridership or traffic volume) and service area population, network, project or facility size, physical limitations on types of services which can be provided and ease of expansion; strategic positioning exhibited by pricing power, competitive profile including proximity to competing facilities and sustainability of such competitiveness, monopoly position, essentiality of an asset to users, ability to generate demand based on strength and size of service area; capital investment funding and flexibility, diversity as measured by ratio of single largest revenue source to operating revenue; charter renewal risk, ownership and affiliation; service area wealth, economic diversity, income, size and growth rate as measured by data provided by the US Bureau of the Census, Bureau of Labor Statistics and commercial data vendors (where applicable).
Operating Performance and Risk: Metrics may include but are not limited to annual revenue, 3 year average operating margin, 5 year compound growth rate of operating revenue, stability and predictability of revenues, diversity of revenue from various payors/contributors/ operations; size and trend of operating cash flow margin or EBITDA; service area trend and utilization data, fixed costs as a portion of operating expenditures; measures of historic and expected usage measured by standard deviations of year over year; length of time in operation of asset; historic demand and revenue trends, demonstrated ability and willingness to raise rates and/or economic regulation; complexity of relevant technology; availability of cash flow to fund capital needs, operating performance relative to industry norms; quality of operator & experience with the asset type; strength and commitment of sponsor & likelihood of operational and financial support; protections in the concession and regulatory framework; restrictions on business activities, use of debt and revenue distributions.
Financial Position, Policy and Ownership: Metrics may include but are not limited to amount of cash & investments; days cash on hand; ratio of total cash and investments to operating expenses; debt service coverage; level of self-support; budget flexibility, operating cash flow margin, liquidity to demand debt, liquidity reserves or contractual arrangements. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
Debt Affordability: Metrics may include but are not limited to size and scope of multi-year CIP (capital improvement plan) relative to condition of assets that will rely on debt for funding; ratio of total cash and investments to debt and/or interest payments; ratio of debt to operating revenue; debt service coverage and ratios; ratio of debt to cash flow and to operating revenue; interest coverage metrics and concession life coverage ratios; debt and debt equivalents.
• Australia Pacific Airports (Melbourne) PtyLtd
• Brisbane Airport Corporation Pty Limited
• New Terminal Financing Company Pty Limited
• Perth Airport Pty Ltd
• Sydney Airport Finance Company Pty Ltd
The principal methodology used for these rated entities was Privately Managed Ports Methodology published in May 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Privately Managed Ports Methodology
Size and Market Profile: Metrics may include but are not limited to scope of operations as measured by operating revenue or usage volume (such as annual ridership or traffic volume) and service area population, network, project or facility size, physical limitations on types of services which can be provided and ease of expansion; strategic positioning exhibited by pricing power, competitive profile including proximity to competing facilities and sustainability of such competitiveness, monopoly position, essentiality of an asset to users, ability to generate demand based on strength and size of service area; capital investment funding and flexibility, diversity as measured by ratio of single largest revenue source to operating revenue; charter renewal risk, ownership and affiliation; service area wealth, economic diversity, income, size and growth rate as measured by data provided by the US Bureau of the Census, Bureau of Labor Statistics and commercial data vendors (where applicable).
Operating Performance and Risk: Metrics may include but are not limited to annual revenue, 3 year average operating margin, 5 year compound growth rate of operating revenue, stability and predictability of revenues, diversity of revenue from various payors/contributors/ operations; size and trend of operating cash flow margin or EBITDA; service area trend and utilization data, fixed costs as a portion of operating expenditures; measures of historic and expected usage measured by standard deviations of year over year; length of time in operation of asset; historic demand and revenue trends, demonstrated ability and willingness to raise rates and/or economic regulation; complexity of relevant technology; availability of cash flow to fund capital needs, operating performance relative to industry norms; quality of operator & experience with the asset type; strength and commitment of sponsor & likelihood of operational and financial support; protections in the concession and regulatory framework; restrictions on business activities, use of debt and revenue distributions.
Financial Position, Policy and Ownership: Metrics may include but are not limited to amount of cash & investments; days cash on hand; ratio of total cash and investments to operating expenses; debt service coverage; level of self-support; budget flexibility, operating cash flow margin, liquidity to demand debt, liquidity reserves or contractual arrangements. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
Debt Affordability: Metrics may include but are not limited to size and scope of multi-year CIP (capital improvement plan) relative to condition of assets that will rely on debt for funding; ratio of total cash and investments to debt and/or interest payments; ratio of debt to operating revenue; debt service coverage and ratios; ratio of debt to cash flow and to operating revenue; interest coverage metrics and concession life coverage ratios; debt and debt equivalents.
• Lonsdale Finance Pty Limited
• Port of Newcastle Invt (Financing) Pty Ltd
The principal methodology used for these rated entities was Privately Managed Toll Roads Methodology published in December 2020. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Privately Managed Toll Roads Methodology
Size and Market Profile: Metrics may include but are not limited to scope of operations as measured by operating revenue or usage volume (such as annual ridership or traffic volume) and service area population, network, project or facility size, physical limitations on types of services which can be provided and ease of expansion; strategic positioning exhibited by pricing power, competitive profile including proximity to competing facilities and sustainability of such competitiveness, monopoly position, essentiality of an asset to users, ability to generate demand based on strength and size of service area; capital investment funding and flexibility, diversity as measured by ratio of single largest revenue source to operating revenue; charter renewal risk, ownership and affiliation; service area wealth, economic diversity, income, size and growth rate as measured by data provided by the US Bureau of the Census, Bureau of Labor Statistics and commercial data vendors (where applicable).
Operating Performance and Risk: Metrics may include but are not limited to annual revenue, 3 year average operating margin, 5 year compound growth rate of operating revenue, stability and predictability of revenues, diversity of revenue from various payors/contributors/ operations; size and trend of operating cash flow margin or EBITDA; service area trend and utilization data, fixed costs as a portion of operating expenditures; measures of historic and expected usage measured by standard deviations of year over year; length of time in operation of asset; historic demand and revenue trends, demonstrated ability and willingness to raise rates and/or economic regulation; complexity of relevant technology; availability of cash flow to fund capital needs, operating performance relative to industry norms; quality of operator & experience with the asset type; strength and commitment of sponsor & likelihood of operational and financial support; protections in the concession and regulatory framework; restrictions on business activities, use of debt and revenue distributions.
Financial Position, Policy and Ownership: Metrics may include but are not limited to amount of cash & investments; days cash on hand; ratio of total cash and investments to operating expenses; debt service coverage; level of self-support; budget flexibility, operating cash flow margin, liquidity to demand debt, liquidity reserves or contractual arrangements. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
Debt Affordability: Metrics may include but are not limited to size and scope of multi-year CIP (capital improvement plan) relative to condition of assets that will rely on debt for funding; ratio of total cash and investments to debt and/or interest payments; ratio of debt to operating revenue; debt service coverage and ratios; ratio of debt to cash flow and to operating revenue; interest coverage metrics and concession life coverage ratios; debt and debt equivalents.
• Airport Motorway Trust
• ConnectEast Finance Pty Ltd
• Hills Motorway Management Limited
• Transurban Finance Company Pty Ltd
• WSO Finance Pty Limited
The principal methodology used for these rated entities was Regulated Electric and Gas Networks published in April 2022. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Regulated Electric and Gas Networks
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• Ausgrid Finance Pty Ltd
• AusNet Services
• Australian Gas Networks Limited
• ElectraNet Pty Ltd.
• First Gas Limited
• Network Finance Company Pty Limited
• NSW Electricity Networks Assets Pty Limited
• SGSP (Australia) Assets Pty Ltd
• Transpower New Zealand Limited
• VECTOR Limited
The principal methodology used for these rated entities was Surface Transportation and Logistics published in December 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Surface Transportation and Logistics
Scale: Scale is considered because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. A large revenue base can lead to economies of scale, for example in terms of equipment costs, as well as a stronger pricing position with customers. Large-scale companies within the industry generally have more flexibility to manage their businesses under different demand and cost scenarios, an important consideration for the surface transportation and logistics industry, which is exposed to economic cycles. Larger companies also generally have greater access to the capital markets, critical for asset-intensive companies such as railroad and trucking companies, which need frequent access to capital markets in order to make sizable investments in their businesses. Scale is measured using total reported revenue.
Business Profile: The business profile of a surface transportation and logistics company greatly influences its ability to generate sustainable earnings and operating cash flows. We break out the scorecard definitions by railroad companies and by trucking and logistics companies based on the different characteristics of the two subsectors. Core aspects of a railroad operator's business profile are its control of the railroad system it operates and its geographic presence. Core aspects of a trucking and logistics company's business profile include its market position; barriers to enter the market in which it operates; diversification by geography and service offering; the quality and diversity of its customer base; and its degree of control over its assets.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position. Key metrics for profitability and efficiency include Operating Margin and EBITA/ Average Assets.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a surface transportation and logistics company's financial flexibility, which is critical to its ability to adapt to changes in market conditions in this highly cyclical sector. Companies need financial resources to invest in infrastructure, equipment, and facilities as well as to make strategic investments to acquire new businesses, diversify product lines or expand into developing geographic regions. Leverage and coverage metrics include Debt/ EBITDA, Funds from Operations/ Debt and EBIT/ Interest Expense.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• Aurizon Network Pty Ltd
• Aurizon Operations Limited
• Australian Rail Track Corporation Limited
The principal methodology used for these rated entities was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Unregulated Utilities and Unregulated Power Companies
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• AGL Energy Ltd
• Origin Energy Limited
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on www.moodys.com, for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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