05.12.2017

Zugemailt von / gefunden bei: Moody's (BSN-Hinweis: Lauftext im Original des Aussenders, Titel (immer) und Bebilderung (oft) durch boerse-social.com aus dem Fotoarchiv von photaq.com)

Moody's Investors Service, ("Moody's") has today changed the outlook on the Baa2 senior unsecured ratings of VERBUND AG (Verbund ) to positive from stable. At the same time, Moody's has affirmed all ratings.

The rating action reflects (1) higher baseload power prices which should gradually filter through into improved earnings; (2) a solid business and financial development in 2016 and the first nine months of 2017, with the company targeting EBITDA of EUR830 million for the full year; and (3) ongoing implementation of measures announced in 2016 to improve the company's financial profile, increasing its resilience to a volatile power price and hydrological environment. The company is particularly sensitive to these factors given the primarily fixed cost nature of its hydro- driven generation fleet, representing 84% of total capacity. 

German and Austrian baseload power prices have continued their rise from the lows in early 2016 of EUR22/ megawatt hour (MWh) to current levels of around EUR35/ MWh. This change has been driven mainly by rising commodity prices, in particular coal, although Moody's expects power prices to remain volatile and low by historic standards.

As at nine months 2017 results, the company expects to achieve average prices of over EUR30/MWh for 2017 on its hydrological output. Earnings in 2018 may drop, reflecting hedges put in place when prices were lower, but overall average achieved prices should continue to improve for 2018 and 2019 as higher prevailing power prices gradually flow through.

In addition, while the company cut its investment budget last year to around EUR754 million for 2017-2019, most of the growth capex is directed towards its transmission grid. Investment to grow the asset base in the relatively low risk network business will be credit positive as it feeds into future earnings and improves the overall business mix. The rating factors in, however, that the additional investments are likely to be partially offset by a lower return on assets in the new regulatory period starting in 2018.

In 2017, Verbund expects to achieve a high EUR184 million of EBITDA from flexibility products, which cover grid services and a range of other products such as control energy and congestion management which mainly reflect the capture of higher prices from Verbund's flexible plant, primarily driven by volatile power output on the grid system in Austria and Southern Germany. These products are positive for Verbund's earnings, but nonetheless are difficult to predict and are a very variable source of earnings on an annual basis. The proposed 4900 GW cap on flows across the interconnectors between Austria and Germany could continue to support the use of flexibility products and may drive modestly higher baseload prices in Austria.

Finally, the positive outlook factors in the company's commitment to free cash flow generation and deleveraging, which will improve the company's financial flexibility and resilience in the context of its rather volatile earnings. The company continues to implement cost cutting measures and capex and dividends remain low by historic levels, although we expect these could gradually increase as the company improves its financial strength. Verbund plans to pay a dividend of 40-45% on 2017 adjusted net income.

The affirmation of Verbund's ratings reflects (1) the company's leading position in the Austrian power generation market; (2) its low cost and carbon free hydro plants which are well positioned in the merit order; and (3) a strong contribution to EBITDA from its lower risk, regulated transmission network business in Austria of around 20-25%. 

In light of Verbund's 51% ownership by the Government of Austria (Aa1 stable), the company falls under Moody's rating methodology for Government-Related Issuers and its Baa2 rating incorporates a two-notch uplift from its standalone credit quality (or baseline credit assessment) of ba1.

WHAT COULD MOVE THE RATING UP OR DOWN

The rating could move up if Verbund demonstrates that it can improve its financial flexibility such that it can generally sustain credit metrics of Funds From Operations (FFO)/net debt comfortably in the twenties and Retained Cash Flow (RCF)/net debt in the mid to high teens in percentage terms. This should help buffer the company against a deterioration in its operating environment such that credit metrics do not fall below FFO/net debt in the high teens to low twenties and RCF/net debt in the low to mid-teens in percentage terms.

The rating could move down if credit metrics appeared likely to deteriorate below the guidance for the current Baa2 rating of FFO/net debt at least in the mid-teens and RCF/net debt of at least low double digits in percentage terms on a sustained basis, although this is not currently envisaged.

Headquartered in Vienna, Verbund is the leading electricity generation company in the Austrian market, where it owns and operates approximately 55% of the country's generation capacity. It also owns and operates most of the Austrian transmission network as well as international interconnections through its 100% subsidiary, Austrian Power Grid AG.

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