S&P revises outlook on Italy's Edison to positive

S&P Global Ratings on Jan. 22 revised the outlook on Italian utility Edison SpA to positive from stable based on the company's improved credit metrics.

Ratings cited Edison's significant progress in de-risking its portfolio by disposing of its Norwegian assets as well as its exploration and production operations not including Algerian assets. The transactions are estimated to reduce net financial debt by about €450 million over 2020 and 2021, according to the agency.

S&P Global Ratings affirmed a BBB- long-term issuer credit rating.

On Jan. 15, Edison signed a second agreement with 2i Rete Gas SpA to sell its 100% interest in subsidiary Infrastrutture Distribuzione Gas SpA, which manages gas distribution networks and systems in 58 municipalities in the regions of Abruzzo, Emilia-Romagna, Lazio, Lombardy and Veneto in Italy.

Separately, Edison agreed to acquire the remaining 70% stake in wind energy company Edison Energie Speciali Spa, or E2i Energie, that it does not already own. E2i Energie owns a portfolio of 38 wind facilities with a total installed capacity of about 706 MW in addition to four projects for 74 MW and three small photovoltaic plants.

"Following the disposals, and having built a stronger renewables platform, Edison's business risk profile is now supported by the gradually increasing contribution from renewables assets and contracted generation capacity from 2022-2023, in our view," the rating agency said in a report. "We note, however, that it is still highly exposed to gas and merchant activities (50% of 2022 EBITDA will come from gas supply and sales and thermal generation)."

S&P Global Ratings' positive outlook for Edison indicates a possible upgrade if Edison reports credit metrics above the rating agency's 45% funds from operations-to-debt threshold while demonstrating a "prudent and clear financial policy" with a commitment to a higher rating and with limited debt-funded acquisitions and contained dividend distribution.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.