Current Report No.: 15/2011
Current Report No.: 15/2011
Date prepared: 14 April 2011
Short name of issuer: ENEA S.A.
Subject: ENEA S.A. receives a “BBB" rating with a stable perspective from Fitch Ratings
Legal basis: Article 56 par. 1 pt. 2 of the Act on Public Offerings - current and periodic information
Content of report:
The management board of ENEA S.A. reports on 14 April 2011 that Fitch Ratings issued ENEA S.A. (ENEA) with a long-term domestic and foreign currency-denominated rating at the level of BBB and a long-term domestic rating at the level of A(pol). The perspective for the ratings is considered stable.
The ratings reflect ENEA’s (ENEA group comprising ENEA S.A. and its subsidiaries) vertically integrated operations in the Polish electricity market, including a leading position in electricity distribution (14% market share) and supply (16% market share) and a material position in power generation (8% of the country’s generation output in 2009). ENEA is the third-largest player in the Polish electricity market, after PGE Polska Grupa Energetyczna S.A. (PGE, ‘BBB+’/Stable) and Tauron Polska Energia S.A. (Tauron, ‘BBB’/Stable).
Currently, ENEA’s strong financial profile is characterised by a high cash position of PLN3bn compared to gross debt of PLN119m at YE10. However, Fitch projects that as a result of the new debt that ENEA plans to raise in 2012-2015 to co-fund its large capex plan, the group's net leverage (Fitch adjusted net debt to EBITDA) will increase to about 2x-2.5x by YE15. This leverage level would still be commensurate with the current ratings and is largely in line with the projected medium-term leverage for other central European (CE) electric utilities rated by Fitch, who also pursue large capex plans.
ENEA’s creditworthiness benefits from a high contribution to EBITDA of regulated electricity distribution earnings (48% in 2010) compared with about 15% to 30% for other integrated utilities rated by Fitch in CE. This results in the group’s cash flow having a lower exposure to power and fuel prices and greater predictability of earnings.
The ratings are constrained by the group's limited generation fuel mix diversification, short position in generation and high generation asset concentration, which is unlikely to materially change by 2015. This results in a lower generation profit margin compared with its CE peers rated by the agency. ENEA has a smaller scale, less dominant market position and lower profitability in generation than its Polish and CE peers. ENEA also has substantial exposure to carbon dioxide (CO2) costs, which might result in an erosion of profits from the generation segment beyond 2012. Furthermore, ENEA’s business profile is constrained because of a lack of access to own fuel sources, which is partly mitigated by long-term hard-coal supply agreements.
ENEA’s credit profile is also constrained by a short track record of operations and relatively low level of integration between ENEA S.A. and its main operating subsidiaries. Fitch expects the company to raise debt at the holding company level, and for the group to be more closely linked in supporting holding company debt.
Definitions of Fitch ratings and the principles of their usage, methodologies applied and limitations and exclusions of liability are available at www.fitchratings.com
Detailed legal basis: Clause 5 par. 1 pt. 26 of the Regulation of the Minister of Finance on current and periodic information published by issuers of securities (...) of 19 February 2009.