New York, November 17, 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 10 November 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.
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 the rated entities listed below was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on https://ratings.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.
• A2A S.p.A.
• Abu Dhabi Future Energy Company PJSC (Masdar)
• Bulgarian Energy Holding EAD
• Centrica plc
• CEZ, a.s.
• Compagnia Valdostana delle Acque S.p.A.
• DTEK Energy B.V.
• EDP - Energias de Portugal, S.A.
• Eesti Energia AS
• Electricite de France
• EnBW Energie Baden-Wuerttemberg AG
• ENEL S.p.A.
• Energia Group Limited
• ENGIE SA
• EVN AG
• EWE AG
• Fortum Oyj
• Hera S.p.A.
• Holding Slovenske elektrarne d.o.o.
• Hrvatska Elektroprivreda d.d.
• Iberdrola S.A.
• InterGen N.V.
• Landsvirkjun
• Latvenergo AS
• Naturgy Energy Group SA
• Orsted A/S
• PGE Polska Grupa Energetyczna S.A.
• RWE AG
• SSE plc
• Statkraft AS
• Vattenfall AB
• VERBUND AG
The principal methodology used for the rated entities listed below was Regulated Electric and Gas Networks published in April 2022. Please see the Rating Methodologies page on https://ratings.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.
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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.
• Scottish Hydro Electric Power Distribution
• Scottish Hydro Electric Transmission plc
• Southern Electric Power Distribution plc
• SP Transmission plc
The principal methodology used for the rated entities listed below was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on https://ratings.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.
• A2A S.p.A.
• Bulgarian Energy Holding EAD
• CEZ, a.s.
• Compagnia Valdostana delle Acque S.p.A.
• Eesti Energia AS
• Electricite de France
• EnBW Energie Baden-Wuerttemberg AG
• ENEL S.p.A.
• ENGIE SA
• EVN AG
• Fortum Oyj
• Hera S.p.A.
• Holding Slovenske elektrarne d.o.o.
• Hrvatska Elektroprivreda d.d.
• Landsvirkjun
• Latvenergo AS
• Orsted A/S
• PGE Polska Grupa Energetyczna S.A.
• Statkraft AS
• Vattenfall AB
The principal methodology used for the rated entities listed below was Trading Companies published in June 2022. Please see the Rating Methodologies page on https://ratings.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.
Trading Companies
Scale: Scale, as indicated through revenues and assets (fixed assets and total assets), is typically indicative of business position, ability to influence business trends and pricing, to weather the vagaries of economic cycles, and to support a stable or growing market position. Scale also can be an indicator of resilience to changes in product demand, geographic diversity, cost absorption and bargaining strength with customers and suppliers.
Business Profile: Business Profile considers the strength of the company's global presence, the diversity of its products, its long-term competitiveness, the stability of its performance, its long-term viability, and its risk profile. Our assessment for Business Profile includes: (i) geographic, operational and product diversity, (ii) competitive advantages, (iii) durability of its market share and customer relationships, (iv) the stability of performance over time, (v) the competitive landscape in each key market, (vi) the threat posed by potential new entrants or technological change, (vii) the degree to which products or services are differentiated, (viii) growth strategy, and (ix) risk profile. The company's risk profile considers a broad range of issues, including the perceived likelihood that the company might undertake sizable or frequent acquisitions in new markets that would raise business risk, exposures to volatile commodity prices and management's policies and practices concerning proprietary trading. The level of vertical integration, the percentage of sales and earnings that arise from merchandising activities and the evolution of the company's business over time might also be considered.
Leverage: Leverage can indicate a company's financial flexibility, long-term viability, ability to make new investments, to weather the vagaries of the business cycle and respond to unexpected challenges, to access to external funding, and to absorb the negative impact from volatile commodity prices and large shifts in consumer demand. Some indicators of leverage include: Debt/ Book Capitalization, Net Debt/ EBITDA, and Funds from Operations/ Debt.
Financial Policy: Management and board tolerance for financial risk is a rating determinant as it directly affects debt levels, credit quality and the risk of adverse changes in financing and capital structure. Considerations can include a company's public commitments in this area, its track record for adhering to commitments, and views on the ability of the company to achieve its targets. Financial risk tolerance serves as a guidepost to investment and capital allocation.
Other Considerations: Additional considerations also include but are not limited to: our assessment of the quality of management, corporate governance, financial controls, liquidity management, event risk and seasonality.
• EDF Trading Limited
• Orsted Salg & Service A/S
The principal methodology used for the rated entities listed below was Business and Consumer Services published in November 2021. Please see the Rating Methodologies page on https://ratings.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.
Business and Consumer Services
Scale: Scale is considered because larger scale can be an indicator of a company's ability to influence business trends and pricing within its service segments and to support a stable or growing market position. Scale also can be an indicator of greater resilience to changes in demand, geographic diversity, cost absorption, R&D capabilities and of greater bargaining strength with customers, labor, and vendors. Revenue is an indicator of scale.
Business Profile: The business profile of a company is considered because it greatly influences its ability to generate sustainable earnings and operating cash flows. The business and consumer service industry comprises a vast array of business models encompassing a multitude of identifiable customer bases worldwide. We consider the underlying demand characteristics of a company's service offerings and their relative breadth, strength, and endurance of demand. Companies that have established a long history of strong demand for a diverse range of service offerings that are critical to customer needs generally entail lower risk compared to those that offer a single line of service which have less importance for customer needs or have a limited history of success.
Profitability: Profits matter because they are necessary to maintain a business's competitive position, including sufficient reinvestment in marketing, research, facilities, and human capital. Sustained high profitability is generally a strong indicator of substantial competitive advantages, particularly if combined with evidence of a stable or rising market share. EBITA Margin 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 adapt to changes in the economic and business environment within the segments in which it operates. Indicators of leverage and coverage include ratios such as: Debt / EBITDA, EBITA / Interest Expense, and Retained Cash Flow/ Net Debt.
Financial Policy: Management and board tolerance for financial risk is a consideration because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets. Financial risk tolerance serves as a guidepost to investment and capital allocation.
Other Rating Considerations: Other considerations may 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 also affect ratings.
• Orsted Salg & Service A/S
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 https://ratings.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 issuer/deal page on https://ratings.moodys.com
for the most updated credit rating action information and rating history.
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