Fitch has maintained the rating for ENERGA

The Fitch rating agency has maintained the long-term ratings for ENERGA SA at the existing level of BBB. In Fitch’s opinion, the planned high share of the regulated Distribution Segment in EBITDA translates into lower business risk and better cash flow predictability compared to conventional power generation. The outlook for the ratings is stable.

In addition, in the justification of the decision Fitch stated that despite the high planned expenditures on energy generation till 2025 (approx. 30 percent of the planned investment budget in 2016-2025), distribution continues to dominate the capital expenditure plan.

Fitch also took into consideration the business risk associated with resumption of the work on construction of the coal-fired unit Ostrołęka C. In the agency’s opinion, this risk is mitigated by the fact that the project will be executed with a partner. The risk is additionally mitigated by the expected introduction of a capacity market in Poland.

The American agency has assessed that ENERGA SA’s debt is a at moderate level, with the net leverage ratio based on funds from operations (FFO) at 1.9x. According to Fitch, in 2018-2020 the ratio will increase to 3.5x, i.e. the maximum permissible level for a rating of BBB.

The increase in debt results from the capital expenditures of PLN 20.6 billion associated with implementation of the strategy for 2016-2025. However, in the agency’s opinion, Energa has some flexibility in the capital expenditure plan. 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.