The rating has been withdrawn for business reasons and is related to the repayment of the Fixed Rate Secured Notes of Solar Chest SA with the total issue volume of € 275 million and the related interest costs.
The latest information on the rating, including rating reports and related methodologies, is available on this LINK .
Rating action
Scope Hamburg has affirmed the A- issuer rating of Elia Group SA / NV and has subsequently withdrawn Elia Group’s issuer rating for business reasons as the Fixed Rate Secured Notes for the acquisition of green certificates in 2015 / 2016 in favor of Elia Group and to buy-back certificates in the period 2019 – 2022 with the total issue volume of € 275 million and the related interest costs were redeemed to the bondholders on 30 Jun 2022.
Rating rationale
The A- affirmation reflects the strong grid operator’s business risk profile, assessed at AA-, characterised by its long-term monopolistic position in Belgium (concession until 2040) and Eastern Germany. Scope Hamburg expects the transmission grid operator to continue to achieve higher EBITDA margins (around 46% by 2023) and increased operating cash flows supported by Elia Group’s regulated frameworks until 2023, a fixed 25-year concession to the Nemo Link interconnect-or UK and the cross-border interconnection of new concession areas and offshore developments in its service territories. Scope Hamburg believes that Elia’s business benefits from tailwinds to accelerate energy transition and reduce (Russian) fossil fuels import dependence, which limit the likelihood of adverse changes to regulations in the near future. In Scope Hamburg’s view, the regulatory regimes with coverage of all reasonable costs, incentives and adequate remuneration for the upcoming 2024-2027 period in Belgium and 2024-2028 in Germany are expected to be preserved.
The Elia group’s much weaker financial risk profile, assessed at BB, continues to limit the stand alone credit quality, and is mainly driven by the consistently high and ongoing rising debt levels and generally weak credit metrics as a result of high infrastructure funding needs. Elia Group’s accelerated sustainable five-year energy transition capex and grid development plan (credit positive ESG factor) of € 9.6 billion for the growth and upgrading of transmission corridors and the integration of offshore wind capacities for the 2022-26 period will burden the high leverage with Scope-adjusted debt/EBITDA of around 7.5x until 2023. Negative free operating cash flows (FOCF) are leading to the need for external funding. Elia’s liquidity assessment is adequate. Available cash funds, currently covering EEG impacts from the high energy market prices, and unused credit facilities, are, however, expected to weaken to around € 1.2 billion (FYE 2023) from € 3.0 billion with committed undrawn credit lines and revolving credit facilities of € 1.6 billion until FYE 2023.
Scope Hamburg’s issuer rating on Elia Group incorporates a one-notch uplift to the group’s standalone credit quality of BBB+, leading to a final issuer rating of A- in accordance with Scope’s Rating Methodology for Government Related Entities. This is based on Scope’s assessment of the ‘high capacity’ and ‘medium willingness’ of Elia’s major joint controlling ownership of sub sovereign shareholder to provide potential support. Drivers are Elia Group’s very high economic importance as well as the shareholder’s capital commitments over the years thanks to the state-backed shares in Eurogrid GmbH, shareholder loans and ongoing equity injections.
One driver in this credit rating action is considered as ESG-related factor but this factor mentioned has no substantial impact on the overall assessment on credit risk.
Outlook and rating-change drivers
Not applicable as the rating has been withdrawn.
Stress testing & cash flow analysis
No stress testing was performed. Scope Hamburg performed its standard cash flow forecasting for the company.
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