Current Report No. 15/2019

Belongs to:

  • Reports

Prepared on: 3 June 2019

Subject:  Fitch Ratings affirms Energa’s rating

Legal basis:

Article 56 section 1 clause 2 of the Public Offer Act – current and periodic information

 

The Management Board of Energa SA (‘Company’, ‘Energa’) announces that on 3 June 2019, Fitch Ratings (‘Agency’, ‘Fitch’) affirmed the Company’s Long-Term foreign- and local-currency Issuer Default Ratings (IDRs) at 'BBB' with a Stable Outlook, a ‘BBB' rating for the bonds issued by the Company's subsidiary Energa Finance AB (publ), and a ‘BB+’ rating for Energa’s hybrid bonds.

The Agency's maintenance of the rating is justified by its dominant share in the activities of the Distribution Business Line Group, which is characterised by a lower business risk and stability of operating flows as compared to the area of conventional electricity generation. As regards the Ostrołęka C power plant construction project, the Agency stresses factors mitigating business risk, such as the acquisition of a contract from the Power Market and the strategic partnership of the industry investor Enea S.A. At the same time, Fitch points out that failure to close the project financing by the end of 2019, increasing Energa's financial involvement in the project beyond what is currently declared or the need to implement it on its own may pose a risk from the perspective of maintaining the current rating status. Moreover, the Agency stresses the uncertainty of the Group's operating cash flows due to the lack of regulations sanctioning the compensation mechanism in the context of the so-called Energy Pricing Act of 2019.

Fitch estimates that due to an ambitious investment plan and the temporary impact of freezing energy sales prices to end users, the FFO could be at the limit of 3.5 in 2019-2020, before dropping to 3.2 in 2021.

The Agency’s full report is available on the Fitch Ratings website.

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