Fitch Ratings has assigned for the first time a rating to Romanian national power transport and system operator Transelectrica, told energynomics.ro, Siddharth Singh, principal analyst of the agency. ”The company hasn’t had a previous rating”, said Singh.
The new rating, a Long-Term Issuer Default Rating of ”BBB” with a stable outlook, sits above the sovereign one, as the company sits on a pile of cash. However, the Romanian government’s decision to up dividends to 90% affects the cash flow risk in the future and the agency assumes that ”in the long run the state will prioritise investments in the grid over dividends”, according to a Fitch release.
The current CEO of the company, Corina Popescu, told a conference on Monday that currently talks are held with the Economy Ministry for unlocking the investments into the company, explaining that in some cases they depend upon administrative actions, such as forest exporpriation. ”Investsments are done over a long-term”, Popescu responded to an energynomics.ro question related to the volume of investments planned for the current year. The company has more than RON 5 billion worth of investment planned by 2025, while Transelectrica’s financial profile is currently strong as the company had a net cash position at end-2016, Fitch says.
”The rating reflects Transelectrica’s solid business profile as an owner and operator of the electricity transmission network in Romania”, reveals a Fitch release. But the decision to grow dividend uptake increases financial risk: In 2017 the government passed a decree requiring increased dividends from state-owned companies and increased Transelectrica’s payout ratio to 90%, compared to the company’s policy of 75%.
”This led to an actual total dividend increase of about RON30 million which is less than 5% of Transelectrica’s gross debt or EBITDA for the year; but which in Fitch’s view increases Transelectrica cash-flow risk as future dividend payments may be influenced by the state as a majority shareholder. Nonetheless, we assume that in the long run the state will prioritise investments in the grid over dividends, as the transmission network is a strategic asset for the country.”
The Romanian state (BBB-/Stable) owns a 59% stake in Transelectrica. About 18% of Transelectrica’s debt is guaranteed by the state, but these are legacy loans which expire in 2018 and 2020 and there is no intention to replace them with other guaranteed instruments. This allows Transelectrica to be rated up to one notch above the sovereign.
Fitch views Transelectrica’s rating as capped at ‘BBB’, at one notch above the Romanian state (BBB-/Stable) due to its links with the state. ”We assess Transelectrica’s standalone profile to be commensurate with a ‘BBB’ rating level. Therefore, a positive rating action could occur if Transelectrica’s standalone credit profile improves and the Romanian sovereign is upgraded.”
