Galp Gas Natural Distribuicao, S.A.

The stable outlook on GGND reflects our expectation that the regulatory environment will continue to support stable cash flow, GGND's operating environment will remain relatively low risk, and management will continue to manage costs and meet regulatory expectations. We therefore anticipate stable credit metrics, with adjusted FFO to debt of 10%-11% over the next three years. Although we do not anticipate a downgrade over our two-year outlook horizon, if we considered that the creditworthiness of GGND's parent, Galp Energia SGPS S.A., had deteriorated, we could lower our rating on GGND. We could also lower the rating on GGND following an unexpected and prolonged deterioration of its stand-alone credit profile (SACP) due, for example, to a change in financial policy leading

...Galp Gas Natural Distribuicao (GGND) benefits from steady cash flows from fully regulated activities under a supportive regulatory framework.GGND's portfolio is composed of long-term contracts that regulate the construction, maintenance, and operation of regulated utility infrastructure. S&P Global Ratings considers the regulator's track record of stability solid, and note that GGND's activities are further supported by the EU's supervisory framework. Additionally, the new regulatory period for Portugal starts in January 2020. It has been extended to four years, providing better visibility on gas and electricity operators' financial performance than the former three-year periods. GGND keeps demonstrating solid operating performance, tempering limited diversification and growth opportunities. The company operates solely in the Portuguese gas distribution business, and is the country's largest gas distributor. GGND has a market share 71% on gas distributed and 74% in terms of connection points,...

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