The rating reflects Electrica’s resilient business profile with 80%-85% of EBITDA coming from regulated and fairly predictable electricity distribution and a strong financial profile. Under our rating case leverage will increase but remain low, which is commensurate with Electrica’s Standalone Credit Profile (SCP) of ‘bbb’, the agency said in a press statement.
The rating is above the sovereign rating of Romania (BBB-/Stable), due to Electrica’s weak links with its main shareholder, the Romanian state, assessed under Fitch’s Government-Related Entities (GRE) and Parent and Subsidiary Linkage (PSL) Rating Criteria.
“We aim to boost Electrica Group’s credibility in front of our investors, because their confidence is of utmost importance for us. Thus, in the relationship with investors, we aim to be seen as a transparent company, as the rating provides all parties interested with an independent assessment, comparable with that of similar companies, which are monitored, in their turn, by rating agencies”, stated Electrica General Manager Corina Popescu, Director General.
Electrica’s main area of operations is electricity distribution, conducted via three regional subsidiaries (SDTN, SDTS and SDMN) operating in the Northern Transylvania, Southern Transylvania and Northern Muntenia regions of Romania. Electricity distribution accounts for 80%-85% of EBITDA in our rating case, contributing to cash flow stability and supporting Electrica’s credit profile, the statement reads.
Electrica has an overall 19% market share in supply in Romania, which includes 51% in the regulated and 11% in the competitive part of this segment. There is a methodology approved by energy regulator ANRE for setting and approving the regulated tariffs, which can be at different levels until their complete elimination in the future. This was initially scheduled for 2018, but did not work out as a large group of customers did not select a new supplier. The competitive part of the supply business is exposed to standard competition rules.
Electrica has a market capitalization of RON3.9 billion after its shares have increased by 18% in 2019, amid deals worth RON371 million.
Electrica reported a consolidated turnover of RON3.1 billion in January-August 2019, up 17% year-over-year, and its net profit halved to RON109 million amid higher costs of purchasing electricity.