Moody's Boosts Dutch Gas TSO Rating
Ratings agency Moody's has boosted the outlook on Dutch Gasunie to positive from stable, it said May 22.
The rating action follows publication of the state-owned transmission system operator's “challenging” regulated tariffs for its Dutch gas transmission activities for 2017-21, which accounted for 72% of the group's normalised operating profit in 2016, and further reductions in the company's planned but minor capex programme over the rest of the decade.
Non-regulated tariffs include capacity at the Gate terminal; and its 60% stake in the Balgzand-Bacton Line subsea gas pipeline to England.
Moody’s analyst Philip Cope said he expects Gasunie to continue to maintain “a solid financial profile despite the challenging determination for its regulated Dutch gas transmission activities for the current regulatory period." Its tariffs have been reduced further, but not by as much as the earlier draft recommended, suggesting the regulator came round to Gasunie’s view that it had cut more fat from its operations than it previously thought.
Reflecting the new tariffs, Gasunie's annual allowed revenues from these activities will fall by around €100mn ($112.2mn) in 2017 and by a further €100mn over the 2018-21 period. Its cost of equity has been lowered in Germany, where it also operates a gas network; and a significant proportion of the long-term contracts on the BBL pipeline expired in December 2016.
Moody's expects Gasunie's adjusted funds from operations (FFO) to be around 20-25% below 2016 levels over the 2017-19 period which will, in turn, weaken Gasunie's cash flow based metrics. However, the group has exhibited a solid financial profile in recent years. Its FFO/net debt has been around 20% over the 2014-16 period.
The rating takes into account the continuing ownership by the Dutch government and the strategic importance to national energy policy, it said. In recent years Gasunie has generated around 80- 85% of its operating profit from its regulated activities. It reported total revenue of €1.548bn in 2016.
William Powell