“An upgrade of Transelectrica’s rating could be prompted by increased transparency and predictability of the regulatory environment, which is currently not fully independent of political influence,” Moody’s said in an opinion.
It said changes in the regulatory framework, which would ensure the timely recovery of operating and investment costs and constrain political influence, could have positive implications for Transelectrica’s rating, provided the company’s financial metrics and liquidity remain sustainably strong.
“Our assessment that there is a high level of default dependence between Transelectrica and the state is based on the growing correlation between the economic development in Romania and the company’s performance,” the ratings agency said.
On the other hand, a significant increase in the company’s leverage or insufficient adjustment of transmission tariffs could prompt a downgrade of Transelectrica’s rating, Moody’s noted.
The ratings agency said Transelectrica derives virtually all of its revenues from domestic activities and its fully foreign-denominated debt exposes it to fluctuations in the value of domestic currency.
“Although the Romanian currency has been relatively stable since 2009, we caution that Transelectrica’s financial profile remains exposed to foreign exchange fluctuations because of the company’s debt, more than 90% of which is denominated in foreign currency,” the report noted.
Moody’s has Transelectrica at ‘Baa3’, with stable outlook, same as its rating on Romanian government.
The Romanian Economy Ministry owns 73.6% in Transelectrica, while investment fund Fondul Proprietatea holds a 13.5% stake.
At around 12:20 hours Wednesday, Transelectrica traded down 0.46% at RON17.32 a share in Bucharest, amid a declining market.