At the same time, the agency removed Transgaz’s ratings from CreditWatch, where they were placed with negative implications on June 11, 2012.
“The downgrade reflects our opinion that the diminished supportiveness of the regulatory framework for gas transmission in Romania weighs on Transgaz’s competitive position. This led us to revise our assessment of the group’s business risk profile to “weak” from “fair” previously,” S&P said in a statement.
The ratings agency said its negative outlook on Transgaz reflects that continued regulatory uncertainty and high ongoing dividend payments could weaken the company’s financial risk profile in the near to medium term.
“Transgaz is applying tariffs that are unchanged since 2009 and we believe that the prospects and timing of a tariff recovery remain highly uncertain,” S&P said. “We do not consider this to be consistent with our previous assessment of the relative supportiveness of the Romanian regulatory environment,” it added.
Transgaz’s ratings could be lowered further if the new regulatory framework announced by Romania’s energy watchdog ANRE would “significantly weaken the group’s cash flow generation,” the statement noted.
Conversely, the company’s outlook could be revised to stable if the new regulations provide sufficient visibility, predictability, and credit support to Transgaz’s earnings, the agency said.
S&P’s ratings action does not factor in the financial impact of Transgaz’s participation in the large-scale Nabucco pipeline project.
“We consider Transgaz’s potential participation in Nabucco as an additional material risk for its financial risk profile, albeit currently remote,” the agency said.
Transgaz was listed on the Bucharest Stock Exchange at the beginning of 2008. The Economy Ministry owns a 73.5% stake, investment fund Fondul Proprietatea has almost 15% of its shares and the rest is distributed among minority shareholders.
The ministry plans to run a secondary offering for a 15% stake in the coming months.
Monday, Transgaz closed up 0.1% at RON201.45 a share (EUR44.85). The company is suspended from trading Tuesday pending a shareholder meeting.