Current Report No. 43/2016
Belongs to:
- Reports
Date: 28 November 2016
Subject: Affirmation of ENERGA’s rating by Fitch Ratings
Legal basis: Article 56 Section 1 Item 2 of the Act on Offerings – current and periodic information
The Management Board of ENERGA SA (“Company”, “ENERGA”) hereby reports that, on 28 November 2016, Fitch Ratings (“Agency”, “Fitch”) affirmed the Company’s long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘BBB’ with a stable outlook and a ‘BBB’ rating for the bonds issued by the Company’s subsidiary ENERGA Finance AB (publ).
The Agency’s affirmation of the rating has been justified by the dominant share of the Distribution Segment in the Group’s total planned capital expenditures and EBITDA, resulting in low business risk and good cash flow predictability compared to conventional power generation. At the same time, the Agency has taken into account in its assessment the business risk associated with the Ostrołęka C Power Plant project. Fitch indicates that this risk is mitigated, without limitation, by strategic partnership in the execution of the project and the expected introduction of the Capacity Market in Poland.
In its report, Fitch estimates that ENERGA SA’s debt is at a moderate level with the Company’s financial leverage with funds from operations (FFO) at 1.9x, which the Agency projects to increase in 2018-2020 to 3.5x, i.e. the maximum permissible level for a rating of ‘BBB’. In Fitch’s opinion, the increase in debt will be a consequence of the implementation of the Group’s Strategy for 2016-2025 and the capital expenditures of PLN 20.6 billion provided for therein.
According to the Agency, ENERGA has some flexibility in allocating the funds budgeted for capital expenditures. Fitch points out that the Company’s plans provide for further improvements in efficiency and for obtaining financing of EUR 250 million from the European Investment Bank in the form of hybrid bonds. These activities may bring about improvements in credit ratios.
The Agency’s full report is available on the Fitch Ratings website.