“The four-notch downgrade of Hidroelectrica’s ratings to B2 from Ba1 follows the company’s recent filing for insolvency, which indicates significantly increased payment default risk, and incorporates the inherent unpredictability of future developments under the insolvency proceedings,” said Richard Miratsky, a Moody’s Vice President–Senior Analyst and lead analyst for Hidroelectrica.
“The downgrade also reflects that we have revised downwards our assumption of extraordinary support for Hidroelectrica from the Romanian government, reflecting its inactivity and lack of transparency concerning recent developments at the company,” Miratsky added.
Moody’s have revised downwards to strong from high its assumption of extraordinary support, reflecting the government’s inactivity and lack of transparency evidenced in the recent developments in Hidroelectrica to date. The high default dependence level remains unchanged, reflecting that Hidroelectrica and its governmental owner have a significant degree of exposure to common drivers of credit quality.
Moody’s noted that the insolvency filing creates a high degree of uncertainty as to whether or not Hidroelectrica will have the ability and financial flexibility to meet its debt service and debt repayments during the insolvency process. Consequently, Hidroelectrica’s ratings remain on review for downgrade, so that Moody’s does not currently expect upward pressure on Hidroelectrica’s ratings. “Conversely, if Moody’s concludes that it is unlikely that Hidroelectrica will obtain financial support to enable it to meet its obligations, the company could be subject to a further multi-notch downgrade,” a statement of the agency reads.
Hidroelectrica is amongst the leading electricity generators in Romania. With a low-cost hydropower generation fleet of 273 hydropower plants and pumping stations and total installed capacity of more than 6,438 MW, Hidroelectrica generated RON3.18 billion (EUR750 million) in revenues and delivered 14.7 terawatt hours (TWh) of electricity in 2011, Moody’s also noted.