London, 23 October 2018 -- Moody's Investors Service ("Moody's") has today
downgraded the long-term ratings of the following four Italian
utilities: Hera S.p.A. ("Hera"),
Italgas S.p.A. ("Italgas"), SNAM
S.p.A. ("SNAM") and Terna - Rete
Elettrica Nazionale S.p.A. ("Terna").
Concurrently, Moody's has affirmed Terna's short-term
P-2/(P)P-2 ratings. The outlook on all ratings is
stable.
The rating actions were prompted by the rating agency's downgrade of the
Government of Italy's bond rating to Baa3 with stable outlook from
Baa2 under review for downgrade. For further information on the
sovereign rating action, please refer to Moody's press release dated
19 October 2018 http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390302
The ratings of 2i Rete Gas S.p.A., A2A S.p.A.,
ACEA S.p.A., Edison S.p.A.
and ENEL S.p.A. are unaffected by this rating action.
A complete list of affected and unaffected issuers and associated ratings
can be found at the end of this press release.
RATINGS RATIONALE
-Hera
The downgrade of Hera's ratings to Baa2 from Baa1 reflects the company's
linkages with the sovereign, given that essentially all its earnings
are generated in Italy. Given its public shareholder base,
Hera is considered a Government-Related Issuer (GRI) and as such
its ratings reflect the combination of a baseline credit assessment (BCA)
of baa2 and assumptions of low support and moderate dependence.
Hera's ratings are positioned one notch above that of the sovereign,
reflecting: (1) the company's diversified business mix;
(2) its portfolio of low risk domestic regulated activities which accounted
for 43% of EBITDA in 2017, with limited exposure to volumes
and underpinned by supportive and transparent regulatory frameworks;
and (3) Hera's good liquidity position, which mitigates the
company's exposure to the risk of volatility in the debt capital
markets.
The stable outlook is in line with the stable outlook on the Government
of Italy's rating, reflecting the company's linkages with
the sovereign which constrain Hera's ratings at Baa2. The
stable outlook also reflects Moody's expectation that Hera will
continue to maintain its current solid financial and liquidity profile.
Any potential upgrade of Hera's ratings would be contingent on an
upgrade of the Government of Italy's rating, combined with
Hera maintaining its current underlying credit profile, including
a good liquidity position.
Conversely, Hera's ratings could be downgraded (1) following
a downgrade of the Government of Italy's rating given its linkages
with the sovereign's credit profile; (2) following a structural
deterioration in Hera's own credit profile as might be evidenced,
for example, by a weakening of its financial ratios, including
funds from operations (FFO)/net debt below the mid-teens or retained
cash flow (RCF)/net debt below the low double digits, both in percentage
terms; or (3) as a result of a deterioration in Hera's business
risk profile driven by its growth strategy, with no offsetting strengthening
in its credit metrics.
- Italgas
The downgrade of Italgas's ratings to Baa2 from Baa1 reflects the
company's linkages with the sovereign, given that all its earnings
are generated in Italy. Italgas's ratings are positioned
one notch above that of the sovereign, reflecting the company's
strategic position and leadership in the gas distribution sector in Italy
and its fully regulated revenues. Italgas's ratings also
factor in the company's solid liquidity position which mitigates
its exposure to the risk of volatility in the debt capital markets.
The stable outlook is in line with the stable outlook on the Government
of Italy's rating, reflecting the company's linkages with
the sovereign which constrain Italgas's ratings at Baa2.
The stable outlook also reflects Moody's expectation that Italgas
will continue to maintain its current financial and liquidity profile.
Any potential upgrade of Italgas's ratings would be contingent on
an upgrade of the Government of Italy's rating, combined with
Italgas maintaining its current underlying credit profile, including
a sound liquidity position.
Conversely, Italgas's ratings could be downgraded (1) following
a downgrade of the Government of Italy's rating given its linkages
with the sovereign's credit profile; or (2) following a structural
deterioration in Italgas's own credit profile as might be evidenced,
for example, by a weakening of its financial ratios, including
FFO/net debt below 10% or RCF/net below 6%. Unanticipated
adverse regulatory developments affecting the company's business
risk profile, evidence of political interference or adverse fiscal
measures could also put negative pressure on Italgas's ratings.
-SNAM
The downgrade of SNAM's ratings to Baa2 from Baa1 reflects the company's
linkages with the sovereign, given that the substantial majority
of its earnings are generated in Italy. SNAM's ratings are
positioned one notch above that of the sovereign reflecting the company's
strategic position in Italy's gas transmission and storage sector,
its crucial role within the country's energy strategy, and
the mainly regulated nature of its activities. SNAM's ratings
also factor in the company's solid liquidity position which mitigates
its exposure to the risk of volatility in the debt capital markets.
The stable outlook is in line with the stable outlook on the Government
of Italy's rating, reflecting the company's linkages with
the sovereign which constrain SNAM's ratings at Baa2. The
stable outlook also reflects the rating agency's expectation that
SNAM will continue to maintain its current sound financial and liquidity
profile.
Any potential upgrade of SNAM's ratings would be contingent on an
upgrade of the Government of Italy's rating combined with SNAM maintaining
its current underlying credit positioning and sound liquidity profile.
Conversely, SNAM's ratings could be downgraded (1) following a downgrade
of the Government of Italy's rating given its linkages with the sovereign's
credit profile; or (2) following a structural deterioration in SNAM's
own credit profile as might be evidenced, for example, by
a weakening of FFO/ net debt and RCF/net debt, respectively,
to below the high single digits in percentage terms and 5%,
or if net debt/fixed assets was to exceed 80%. Unanticipated
adverse regulatory developments affecting the company's business
risk profile, evidence of political interference or adverse fiscal
measures could also put negative pressure on SNAM's ratings.
- Terna
The downgrade of Terna's long term ratings to Baa2 from Baa1 reflects
the company's linkages with the sovereign, given that the substantial
majority of its earnings are generated in Italy. Terna's
ratings are positioned one notch above that of the sovereign, reflecting
the company's strategic position as owner and operator of Italy's
electricity transmission assets, its crucial role in delivering
the country's energy strategy as well as the mainly regulated nature of
its activities. Terna's ratings also factor in the company's
solid liquidity position which mitigates its exposure to the risk of volatility
in the debt capital markets.
The affirmation of Terna's short-term P-2/(P)P-2
ratings reflects the linkage between short-term and long-term
ratings under Moody's rating scale.
The stable outlook is in line with the stable outlook on the Government
of Italy's rating, reflecting the company's linkages with
the sovereign which constrain Terna's ratings at Baa2. The
stable outlook also reflects Moody's expectation that Terna will
continue to maintain its current sound financial and liquidity profile.
Any potential upgrade of Terna's ratings would be contingent on
an upgrade of the Government of Italy's rating, combined with
Terna maintaining its current underlying credit profile, including
a sound liquidity position.
Conversely, Terna's ratings could be downgraded (1) following
a downgrade of the Government of Italy's rating given its linkages
with the sovereign's credit profile; or (2) following a structural
deterioration in Terna's own credit profile as might be evidenced,
for example, by a weakening of FFO/net debt below the high single
digits in percentage terms or RCF/net debt below 5%. Unanticipated
adverse regulatory developments affecting the company's business
risk profile, evidence of political interference or adverse fiscal
measures could also put negative pressure on Terna's ratings.
LIST OF AFFECTED AND UNAFFECTED RATINGS
Downgrades:
..Issuer: Hera S.p.A.
.... Issuer Rating, Downgraded to Baa2
from Baa1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Baa2 from (P)Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa2 from Baa1
..Issuer: Italgas S.p.A.
.... Issuer Rating, Downgraded to Baa2
from Baa1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Baa2 from (P)Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa2 from Baa1
..Issuer: Terna - Rete Elettrica Nazionale
S.p.A.
.... Issuer Rating, Downgraded to Baa2
from Baa1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Baa2 from (P)Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa2 from Baa1
..Issuer: SNAM S.p.A.
.... Issuer Rating, Downgraded to Baa2
from Baa1
....Senior Unsecured Conv./Exch.
Bond/Debenture, Downgraded to Baa2 from Baa1
....Senior Unsecured Medium-Term Note
Program, Downgraded to (P)Baa2 from (P)Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa2 from Baa1
Affirmations:
..Issuer: Terna - Rete Elettrica Nazionale
S.p.A.
.... Issuer Rating, Affirmed P-2
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)P-2
No action:
..Issuer: 2i Rete Gas S.p.A.
.... Issuer Rating, Baa2
....Senior Unsecured Medium-Term Note
Program, (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Baa2
....Outlook, Stable
..Issuer: A2A S.p.A.
.... Issuer Rating, Baa2
....Senior Unsecured Medium-Term Note
Program, (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Baa2
....Outlook, Stable
..Issuer: ACEA S.p.A.
.... Issuer Rating, Baa2
....Senior Unsecured Medium-Term Note
Program, (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Baa2
....Outlook, Stable
..Issuer: Edison S.p.A.
.... Issuer Rating, Baa3
....Outlook, Stable
..Issuer: ENEL S.p.A.
.... Issuer Rating, Baa2
....Senior Unsecured Medium-Term Note
Program, (P)Baa2
....Senior Unsecured Regular Bond/Debenture,
Baa2
....BACKED Senior Unsecured Regular Bond/Debenture,
Baa2
....Subordinate, Ba1
....Junior Subordinate, Ba1
....Outlook, Stable
Outlook Actions:
..Issuer: Hera S.p.A.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Italgas S.p.A.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Terna - Rete Elettrica Nazionale
S.p.A.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: SNAM S.p.A.
....Outlook, Changed To Stable From
Rating Under Review
PRINCIPAL METHODOLOGIES
The principal methodology used in rating Terna - Rete Elettrica
Nazionale S.p.A., Italgas S.p.A.
and SNAM S.p.A. was Regulated Electric and Gas Networks
published in March 2017. The methodologies used in rating Hera
S.p.A. were Unregulated Utilities and Unregulated
Power Companies published in May 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.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The person who approved SNAM S.p.A. credit ratings
is Neil Griffiths-Lambeth, Associate Managing Director,
Infrastructure Finance Group, JOURNALISTS: 44 20 7772 5456,
CLIENT SERVICE: 44 20 7772 5454. The person who approved
Terna - Rete Elettrica Nazionale S.p.A.,
Italgas S.p.A., and Hera S.p.A.
credit ratings is Paul Marty, Senior Vice President/Manager,
Infrastructure Finance Group, JOURNALISTS: 44 20 7772 5456,
CLIENT SERVICE: 44 20 7772 5454.
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.
Alessandra Mac Donald
Analyst
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
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
Paul Marty
Senior Vice President/Manager
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
