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Recent Rating Reviews On EMEA Utilities Reflect The Sector's Strength Against COVID-19 Shock

Recent Rating Reviews On EMEA Utilities Reflect The Sector's Strength Against COVID-19 Shock

We continue to believe that the EMEA utilities sector is relatively resilient to the economic shock from COVID-19 and low oil prices, as we highlighted in our report “EMEA Utilities Should Withstand COVID-19 Better Than Most Sectors,” published on March 24, 2020. Below, we provide a summary of the recent rating actions and links to reports we have published on the sector since early March.

Our recent CreditWatch placements and outlook revisions to negative primarily reflect issuers' larger exposure to merchant power activities (power generation and supply) or other more cyclical activities (energy services), combined with no or tight headroom under their credit metrics at year-end 2019. This includes outlook revisions on Engie, Fortum, Uniper, and CEZ (see table 1). We believe these activities will be negatively affected in 2020 through lower volumes sold due to weaker demand, and in 2021 through lower realized prices as power prices remain subdued for next year. The negative rating bias also reflects the need for material remediation measures to cope with these earnings' downside risks, either through drastic cuts in operating costs, investments, or dividends; or though significant asset disposals, which may become more challenging to complete in the current environment. Because the extent of the earnings' downside remains unknown and the ability and willingness to successfully complete such remediation measures are uncertain, we see mounting downside pressure on the ratings on these companies. On top of this, Croatia-based Zagrebacki Holding has also been affected by the recent earthquake in Zagreb.

Since we published our report “EMEA Utilities Should Withstand COVID-19 Better Than Most Sectors,” last week, some utilities have announced dividend cuts (see table 2) and confirmed that investments will be lower than initially planned (notably EDF, Snam, EON, and Engie). We consider these positive credit developments. Some utilities have announced delayed bill collections, which will negatively affect working capital. These may be enforced by governments (as in France or Russia) or by companies themselves (as in the case of Naturgy in Spain).

At this stage, we continue to consider likely working capital increases as manageable for utilities given the concentration on the most vulnerable customers and the utilities' adequate liquidity levels. What's more, we consider these increases only temporary. Yet, if the outcomes of the COVID-19 pandemic deepen, we may see increasing corporate default rates, and some of these delayed bills could turn into bad debt. While it is currently too early to assess, we continue to believe that this risk will be one of the key challenges for utilities over the coming quarters.

On a more positive note, utilities have a demonstrated their ability to access capital markets even amid the currently volatile situation, owing to their generally more resilient business risk profiles and solid investment-grade ratings (see table 3). While financing conditions are not as favorable as at the beginning of the year, the coupons of these recent bonds are still contributing to lowering their average cost of debt.

We consider the main risks for utilities will stem from prolonged lockdown measures, which could notably imply more downward pressure on sovereign ratings. (see our "Calendar Of 2020 EMEA Sovereign, Regional, And Local Government Rating Publication Dates," published on Dec. 20, 2019).

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: As the situation evolves, we will update our assumptions and estimates accordingly.

Table 1

Rating Actions Since March 1, 2020
To From Release Date

Zagrebacki Holding d.o.o.

B+/Watch Neg/-- B+/Stable/-- April 1, 2020

N.V. Eneco Beheer

A-/Stable/A-2 BBB+/Watch Pos/A-2 March 31, 2020

CEZ a.s.

A-/Negative/-- A-/Stable/-- March 31, 2020

Enemalta PLC

BB-/Negative/-- BB-/Stable/-- March 16, 2020


A-/Watch Neg/A-1 A-/Stable/A-1 March 25, 2020

Fortum Oyj

BBB/Negative/A-2 BBB/Watch Neg/A-2 March 19, 2020

Georgian Oil and Gas Corp. JSC

BB-/Watch Neg/B BB-/Stable/B March 24, 2020

GIE ENGIE Alliance

A-/Watch Neg/-- A-/Stable/-- March 25, 2020

Uniper SE

BBB/Negative/-- BBB/Watch Neg/-- March 20, 2020
Source: S&P Global Ratings.

Chart 1


Chart 2


Table 2

Utilities' Announced Dividends Cuts Or Cancellations
Issuer Reported 2019 distribution (mil. €) Cut or cancellation Date of announcement


661 Cut by 50% 2-Apr-20


2,522 Cancellation 2-Apr-20


58 Cancellation 2-Apr-20


556 Cancellation 2-Apr-20


316 Cancellation 2-Apr-20
Source: S&P Global Ratings.

Table 3

Bond Issuances Since Early March 2020 Reflect Still Good Market Access
Issuer Ratings* Amount raised Coupon Maturity Issuance Date Green?

Red Electrica

A-/Stable/A-2 €400 mil. 0.88% 15-Apr-25 3-Apr-20 No

Iberdrola S.A.

BBB+/Stable/A-2 €750 mil. 0.88% 1-Jun-25 1-Apr-20 Yes

Vattenfall AB

BBB+/Stable/A-2 SEK4.1 bil. 1.75% 1-Oct-21 1-Apr-20 Yes


BBB/Stable/A-2 €750 mil. 1.00% 31-Oct-25 31-Mar-20 Yes


A-/Watch Neg/A-1 €1 bil. 1.38% 20-Mar-25 20-Mar-20 No


A-/Watch Neg/A-1 €750 mil. 1.75% 20-Mar-28 20-Mar-20 Yes


A-/Watch Neg/A-1 €750 mil. 1.71% 20-Mar-32 20-Mar-20 Yes

Vattenfall AB

BBB+/Stable/A-2 €500 mil. 0.05% 15-Oct-25 12-Mar-20 Yes

Cadent Gas Ltd.

BBB+/Stable/-- €500 mil. 0.75% 4-Mar-32 11-Mar-20 No
*Ratings as of April 6, 2020. Source: S&P Global Ratings.

Table 4

Utilities Potentially Affected By A One-Notch Sovereign Downgrade
Org Country SACP Likelihood of support Utility L-T issuer credit rating Government Government L-T foreign currency ratings

Energie Steiermark AG

Austria a- Moderate (+1 notch) A/Stable

State of Styria



Austria a- Moderate (+1 notch) A/Stable

State of Lower Austria


Azerenerji JSC

Azerbaijan b- Extremely High (+4 notches) BB/Stable



Zagrebacki Holding d.o.o.

Croatia b- Very High (+2 notches) B+/Watch Neg

City of Zagreb


CEZ a.s.

Czechia bbb Moderately High (+2 notches) A-/Negative

Czech Republic


Georgian Oil and Gas Corp. JSC

Georgia b+ Very High (+1 notch) BB-/Watch Neg



Public Power Corp. S.A.

Greece ccc+ Moderate (+1 notch) B-/Stable




Italy bbb+ Extremely High (no impact) Capped by Italy (-1 notch) BBB/Negative

City of Milan



Italy a- Moderately High (no impact) ROS (-1 notch) BBB+/Negative



Terna SpA

Italy a- Moderately (no impact) ROS (-1 notch) BBB+/Negative



Kazakhstan Electricity Grid Operating Co. (JSC)

Kazakhstan bb- High (+2 notches) BB+/Stable




Kazakhstan bb Moderately High (no impact) BB/Negative




Kazakhstan bb High (no impact) Strategically important (-1 notch) BB/Negative



Ignitis Group UAB

Lithuania bbb Moderately High (+1 notch) BBB+/Negative



N.V. Nederlandse Gasunie

Netherlands a High (+2 notches) AA-/Stable



Atomic Energy Power Corp. JSC

Russia bbb- Very High (no impact) BBB-/Stable



Federal Grid Co. of the Unified Energy System

Russia bb+ High (+1 notch) BBB-/Stable



Interregional Distribution Grid Company of Centre PJSC

Russia bb Moderate (+1 notch) BB+/Stable



Moscow United Electric Grid Co. PJSC

Russia bb Moderate (+1 notch) BB+/Stable



Mosenergo PJSC

Russia bbb- N/A BBB-/Stable



Mosvodokanal JSC

Russia bbb- Very High (no impact) BBB-/Stable

City of Moscow


Rosseti PJSC

Russia bb High (+2 notches) BBB-/Stable



RusHydro PJSC

Russia bb+ High (+1 notch) BBB-/Stable




Russia bbb- N/A BBB-/Stable



Vodokanal St. Petersburg

Russia bb Very High (+1 notch) BB+/Stable

City of St Petersburg


Tekniska verken i Linkoping AB

Sweden bbb+ High (+3 notches) A+/Stable

City of Linköping

Ratings as of April 6, 2020. SACP--Stand-alone credit profile. L-T--Long-term. FC--Foreign currency. Source: S&P Global Ratings.

Rating Action Research Since March 1

CreditWatch placements
  • ENGIE Rating Placed On CreditWatch Negative Amid COVID-19 Outbreak Due To Tight Financial Headroom And Governance Change, March 25, 2020
  • Croatia-Based Zagrebacki Holding 'B+' Rating On Watch Negative On Tightening Liquidity, April 1, 2020
Negative outlooks
  • CEZ a.s. Outlook Revised To Negative On Tight Financial Headroom Amid Market Turmoil; Ratings Affirmed, March 31, 2020
  • Fortum Oyj 'BBB' Rating Affirmed On Russian Regulatory Approval; Outlook Negative As Material Uncertainties Remain, March 19, 2020
  • Uniper SE 'BBB' Rating Affirmed On Russian Regulatory Approval; Outlook Negative, March 20, 2020
  • Maltese Utility Enemalta Outlook To Negative On Financial Hit From Loss Of Submarine Power Cable; 'BB-' Rating Affirmed, March 16, 2020
  • KazTransGas And KazTransOil Outlooks Revised To Negative After Similar Action On Parent; Affirmed At 'BB', March 31, 2020
Rating affirmations
  • French Utility Veolia Environnement S.A. Affirmed At 'BBB' Despite COVID-19 Operating Uncertainty; Outlook Stable, March 27, 2020
  • Centrica Ratings Affirmed Amid Challenging Market Conditions On Management Commitment To Credit Metrics; Outlook Stable, March 31, 2020
  • German Utility E. ON SE 'BBB/A-2' Ratings Affirmed Following Asset Swap Progress; Outlook Remains Stable, March 26, 2020
  • Red Electrica Corporacion S.A. 'A-/A-2' Ratings Affirmed On Regulatory Clarity; Outlook Stable, March 6, 2020
Rating upgrade
  • Eneco Beheer Upgraded To 'A-' On Potential Support From New Majority Shareholder Mitsubishi Corp; Outlook Stable, March 31, 2020
Other rating analysis updates
  • Electricite de France, S.A., April 3, 2020
  • Energy Group Enel's 2019 Results Are In Line With Expectations; 2020-2022 Guidance Currently Unaffected By COVID-19, March 23, 2020
  • Enagas S.A., March 24, 2020
  • Italian Gas Transmission Company SNAM's 2019 Results Are In Line With Expectations; COVID-19 Impact Should Be Limited, March 20, 2020
  • Enexis Holding N.V., March 6, 2020
  • Terna's 2019 Results And Ambitious 2020-2024 Strategic Plan Won't Harm Its Credit Quality, March 11, 2020
  • Tekniska verken i Linkoping AB, March 12, 2020

This report does not constitute a rating action.

Primary Credit Analyst:Pierre Georges, Paris (33) 1-4420-6735;
Secondary Contact:Beatrice de Taisne, CFA, London (44) 20-7176-3938;

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