Artera Services LLC

The stable outlook reflects the significant improvement in credit metrics pro forma for the 2020 acquisitions and our expectation that demand for the company's maintenance, repair, and upgrade work to remain stable over the next 12 months. We could lower the ratings within the next 12 months if weaker-than-expected operating performance results in sustained negative FOCF or strained liquidity. This could occur if profitability declines, leading to substantial negative cash flow. Alternatively, we could lower the ratings if we come to believe that Artera depends on favorable business, financial, and economic conditions to meet its financial commitments. We could also do so if we view the company's financial commitments as unsustainable in the long term, even though it may not

...We assume operating performance will continue to improve in 2021, resulting in stronger credit metrics compared to 2020. An expected reduction in large-project revenue in its gas transmission business segment in 2020 was offset by stronger performance in its gas distribution and electric operating segments. Additionally, the company faced some delayed work because of the pandemic. However, mandates to maintain utility infrastructure in the U.S. underpins 2021 demand. In addition, we assume the company will realize the full benefit of its 2020 acquisitions, which should bolster EBITDA margins. We expect EBITDA margins in the mid-teens percent area in 2021 with debt to EBITDA around 6x. In addition, we expect free operating cash flow (FOCF) to debt will remain positive in 2021 given the company's relatively low working capital and maintenance capital expenditure needs. The rating on Artera reflects its position in the highly fragmented and competitive utility services industry. Artera's 2020...

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