On November 29, S&P cut Romania’s local currency sovereign credit rating to ‘BB+/B’ from ‘BBB-/A-3’, following a revision of its methodology for rating sovereign governments.
Wednesday, the agency affirmed Transgaz’s ‘BB+’ foreign currency rating. The rating outlook is stable.
At the same time, S&P revised its assessment of Transgaz’ stand-alone credit profile to ‘bb+’ from ‘bbb-‘ previously.
It said the ratings on Transgaz are underpinned by the company’s strong monopoly position, relatively predictable cash flows from regulated transmission activities, and robust credit metrics. “These strengths are offset by the risks we see associated with the regulatory reset every five years, an outdated asset base, and some remaining transition-economy features of Romania. Although we do not factor into our base-case scenario Transgaz’ involvement in the construction of the Nabucco pipeline, we believe the project carries a risk for the company’s credit ratios.”
The ratings are based on Transgaz’ stand-alone credit profile and on S&P’s opinion that there is a “high” likelihood that the Romanian government would provide timely and sufficient extraordinary support to Transgaz, in the event of financial distress.
S&P notes the company’s “very important” role for Romania’s energy sector and the “strong” link with the government, Transgaz’s majority shareholder. “Despite its planned sale of a further 15% stake in Transgaz, the government will likely retain a controlling interest owing to the strategic nature of Transgaz’ operations and its above-average cash generation.”