London, 30 May 2018 -- Moody's Investors Service ("Moody's") has today
placed on review for downgrade the long-term ratings of the following
Italian utility issuers: CDP RETI S.p.A. (CDP
RETI), Compagnia Valdostana delle Acque S.p.A.
(CVA), Hera S.p.A. (Hera), Italgas S.p.A.
(Italgas), SNAM S.p.A. (SNAM), and Terna
- Rete Elettrica Nazionale S.p.A. (Terna).
At the same time, Moody's has affirmed the short-term
ratings of Terna.
The decision to place the ratings on review for downgrade was prompted
by the corresponding action on Italy's Baa2 government bond rating.
For further information on the sovereign rating action, please refer
to Moody's press release dated 25 May 2018 (https://www.moodys.com/research/--PR_384025)
and to Moody's issuer comment dated 29 May 2018 (https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1127479).
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 companies and associated rating
actions can be found at the end of this press release.
RATINGS RATIONALE
- CVA
The review for downgrade of CVA's Baa1 long-term issuer rating
reflects the company's linkages with the sovereign, given
that all its earnings are generated in Italy. Given the 100%
ownership by the Autonomous Region of Valle d'Aosta (Baa1 ratings under
review), CVA is considered a Government Related Issuer (GRI) and
as such its rating reflects the combination of a baseline credit assessment
(BCA) of baa1 and assumptions of moderate support and high dependence.
CVA's rating continues to be supported by: (1) its well-established
position in the market of hydroelectric power generation in Italy as fourth-largest
hydro producer in the country; (2) the low cost and low carbon emission
portfolio of the company's power generation assets; and (3) the important
contribution to EBITDA coming from lower risk contracted power generation
earnings and regulated electricity distribution activities in Italy.
Given the review for downgrade, an upgrade of CVA's rating
is unlikely.
Conversely, any downward move in the Italian government bond rating
would likely result in a corresponding adjustment of CVA's rating.
Downward rating pressure could also develop as a result of (1) a weakening
of CVA's liquidity position, for example as a consequence of the
late refinancing of the existing debt maturities, or (2) the failure
to demonstrate a financial profile in line with Moody's ratio guidance
for the Baa1 rating (i.e. funds from operations (FFO)/net
debt ratio below 40% or retained cash flows (RCF)/net debt ratio
below the low thirties, in percentage terms) for a prolonged period
as a consequence, for example, of a permanently higher dividend
payout or acquisitions, or as a result of an unexpected deterioration
in power prices.
- Hera
The review for downgrade of Hera's Baa1 long term ratings 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 baa1 and assumptions of low support and moderate dependence.
Hera's ratings are positioned one notch above that of the sovereign,
reflecting: (1) Hera's diversified business mix; (2) its portfolio
of low risk domestic regulated activities accounting for 43% of
EBITDA in 2017, with limited exposure to volumes and underpinned
by supportive and transparent regulatory frameworks; and (3) its
steady financial profile, as demonstrated by FFO/net debt of 21.7%
and RCF/net debt of 16.8% (both ratios exclude the securitisation
of receivables which are not publicly disclosed by the company) at year-end
2017. Moody's ratings also factor in Hera's good liquidity
position, which mitigates the company's exposure to the risk
of volatility in the debt capital markets.
Given the review for downgrade, an upgrade of Hera's ratings
is unlikely.
Conversely, any downward move in the Italian government bond rating
would likely result in a corresponding adjustment of Hera's ratings.
Although not anticipated, downward rating pressure could also develop
as a result of (1) a weakening of the company's financial profile with
FFO/net debt permanently falling below the upper teens in percentage terms
and RCF/net debt below the low teens in percentage terms; or (2)
a deterioration of its business risk profile as a result of its growth
strategy, with no offsetting strengthening in its credit metrics.
- Italgas
The review for downgrade of Italgas's Baa1 long term ratings reflects
the company's linkages with the sovereign, given that essentially
all its earnings are generated in Italy. Italgas' 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. Moody's ratings
also factor in Italgas's good liquidity position which mitigates
the company's exposure to the risk of volatility in the debt capital
markets.
Given the review for downgrade, an upgrade of Italgas's ratings
is unlikely.
Conversely, any downward move in the Italian government bond rating
would likely result in a corresponding adjustment of Italgas's ratings.
Although not anticipated, downward pressure on the ratings could
also result from: (1) failure to demonstrate a financial profile
in line with the guidance for the Baa1 ratings (e.g. FFO/net
debt below the low teens in percentage terms) for instance as a consequence
of deteriorating operating conditions or larger dividend payouts than
factored into the current ratings; (2) failure to maintain the existing
good liquidity profile; or (3) adverse regulatory developments.
- SNAM
The review for downgrade of SNAM's Baa1 long term ratings reflects
the company's linkages with the sovereign, given that essentially
all its earnings are generated in Italy. SNAM's ratings are
positioned one notch above that of the sovereign, reflecting the
company's solid financial profile, and its strategic position as
the main operator of the country's gas transmission, storage
and regasification assets, as well as its important role in the
execution of Italy's energy plan. Its ratings also factor
in the fully regulated nature of its activities and good liquidity position
which mitigates the company's exposure to the risk of volatility
in the debt capital markets.
Given the review for downgrade, an upgrade of SNAM's ratings
is unlikely.
Conversely, any downward move in the Italian government bond rating
would likely result in a corresponding adjustment of SNAM's ratings.
Although not expected, downward pressure on the ratings could also
result from a deterioration in SNAM's credit profile - whether
as a result of (1) adverse regulatory developments and/or evidence of
political interference and/or discriminatory fiscal measures; (2)
a strategic shift towards a greater emphasis on non-core international
growth; (3) increased capex; or (4) a structural deterioration
in financial profile, for example if FFO/ net debt and RCF/net debt
were to weaken to below 10% and 6% respectively, or
net debt/fixed assets was to exceed 70%.
- Terna
The review for downgrade of Terna's Baa1 long term ratings reflects
the company's linkages with the sovereign, given that the vast majority
of its earnings are generated in Italy. Terna's Baa1 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 and the mainly regulated nature of its activities.
Moody's ratings also factor in Terna's good liquidity position which
mitigates the company's 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.
Given the review for downgrade, an upgrade of Terna's ratings
is unlikely.
Conversely, any downward move in the Italian government bond rating
would likely result in a corresponding adjustment of Terna's long-term
ratings. Although not anticipated, downward pressure on the
ratings could also result from: (1) adverse regulatory developments
affecting Terna's business risk profile, evidence of political interference
or adverse fiscal measures; (2) the implementation of a riskier strategy
of international growth or a material increase in investments commitment
that does not translate into a similar increase in Regulatory Asset Base
(RAB); or (3) credit metrics permanently below Moody's guidance
(i.e. FFO/net debt below the low double-digits in
percentage terms and RCF/net debt below 7%).
- CDP RETI
The review for downgrade of CDP RETI's Baa3 long term ratings reflects
the review for downgrade of the ratings of the company's operating
subsidiaries SNAM, Terna and Italgas (together with CDP RETI representing
"the Group"). CDP RETI's ratings are underpinned by:
(1) the well-established and transparent regulatory frameworks
applicable to SNAM, Terna and Italgas (the main gas and electricity
transmission operators and gas distribution operator in Italy) which support
stable dividend flows; (2) Moody's expectation that CDP RETI
will maintain its portfolio of equity participations unchanged; and
(3) the company's good liquidity profile. The ratings also
continue to incorporate a one-notch reduction when compared to
the proportionally consolidated credit quality of the Group to reflect
the structural subordination of the creditors at the holding company level.
Given the review for downgrade, an upgrade of CDP RETI's ratings
is unlikely.
Conversely, a deterioration in the credit quality of SNAM,
Terna or Italgas could potentially put downward pressure on CDP RETI's
ratings. Downward rating pressure could also result from:
(1) a deterioration in the company's financial metrics resulting for example
in FFO/net debt ratio consistently below 10%, RCF/net debt
ratio consistently below the mid-single digits in percentage terms
and net debt/fixed assets higher than 85%, as a proxy of
net debt/RAB higher than 75%); (2) a more aggressive financial
policy adopted by CDP RETI; or (3) a significant change in CDP RETI's
shareholder structure, if it leads to a less supportive stance from
the shareholders towards CDP RETI.
LIST OF AFFECTED RATINGS
- Compagnia Valdostana delle Acque S.p.A.:
CVA's Baa1 long-term issuer rating was placed on review for
downgrade.
- Hera S.p.A.: Hera's Baa1 long-term
issuer rating and senior unsecured ratings, as well as the provisional
(P)Baa1 rating on Hera's EUR3.0 billion Euro Medium Term Note (EMTN)
programme were placed on review for downgrade.
- Italgas S.p.A.: Italgas' Baa1
long-term issuer rating and senior unsecured ratings, as
well as the provisional (P)Baa1 rating on Italgas' EUR3.5 billion
EMTN programme were placed on review for downgrade.
- SNAM S.p.A.: SNAM's Baa1 long-term
issuer rating and senior unsecured ratings, as well as the provisional
(P)Baa1 rating on SNAM's EUR10 billion EMTN programme were placed on review
for downgrade.
- Terna - Rete Elettrica Nazionale S.p.A.:
Terna's Baa1 long-term issuer rating and senior unsecured
ratings, as well as the provisional (P)Baa1 rating on Terna's EUR8
billion EMTN programme were placed on review for downgrade. Concurrently,
Moody's affirmed Terna's short term P-2/(P)P-2 ratings.
-CDP RETI S.p.A.: CDP RETI's Baa3
long-term issuer rating as well as the Baa3 rating on the EUR750
million senior unsecured notes issued by CDP RETI were placed on review
for downgrade.
LIST OF UNAFFECTED RATINGS
- 2i Rete Gas S.p.A. (2i RG): The Baa2
issuer and senior unsecured ratings with stable outlook remain unchanged.
The (P)Baa2 rating on 2i RG's EUR3.5 billion Euro Medium
Term Note (EMTN) programme with stable outlook also remains unchanged.
- A2A S.p.A. (A2A): The Baa2 issuer
and senior unsecured ratings with stable outlook remain unchanged.
The (P)Baa2 rating on A2A's EUR4 billion EMTN programme with stable outlook
also remains unchanged.
- ACEA S.p.A. (ACEA): The Baa2 issuer
and senior unsecured ratings with stable outlook remain unchanged.
The (P)Baa2 rating on ACEA's EUR3 billion EMTN programme with stable
outlook also remains unchanged.
- Edison S.p.A.: The Baa3 issuer rating
with stable outlook remains unchanged.
- ENEL S.p.A. (Enel): The Baa2 issuer
and senior unsecured ratings with stable outlook remain unchanged.
The (P)Baa2 rating on Enel's EUR35 billion EMTN programme with stable
outlook also remains unchanged.
PRINCIPAL METHODOLIGIES
The principal methodology used in Terna - Rete Elettrica Nazionale
S.p.A., Italgas S.p.A.,
SNAM S.p.A. and CDP RETI S.p.A.
ratings was Regulated Electric and Gas Networks published in March 2017.
The methodologies used used in Compagnia Valdostana delle Acque S.p.A.
ratings was Unregulated Utilities and Unregulated Power Companies published
in May 2017 and Government-Related Issuers published in August
2017.
The methodologies used in Hera S.p.A. ratings were
Government-Related Issuers published in August 2017, Regulated
Water Utilities published in December 2015, Regulated Electric and
Gas Networks published in March 2017, Unregulated Utilities and
Unregulated Power Companies published in May 2017 and Environmental Services
and Waste Management Companies published in April 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 CDP RETI S.p.A. and SNAM
S.p.A. credit ratings is Neil Griffiths-Lambeth,
Associate Managing Director, Infrastructure Finance Group,
JOURNALISTS: 44 20 7772 5456, SUBSCRIBERS: 44 20 7772
5454. The person who approved Terna - Rete Elettrica Nazionale
S.p.A., Italgas S.p.A.,
Compagnia Valdostana delle Acque 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, SUBSCRIBERS: 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
Corporate 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
Niel Bisset
Senior Vice President
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Paul Marty
Senior Vice President/Manager
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Neil Griffiths-Lambeth
Associate Managing Director
Corporate 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
