REN-Redes Energeticas Nacionais SGPS S.A.

The stable outlook on REN indicates our view that the company's credit ratios will recover from COVID-19's impact on 2020-2021, by redeeming tariff-deviation compensation throughout 2022-2023. Credit ratios will strengthen moderately, with adjusted FFO to debt close to 12% on average in 2021-2023, thanks to positive cash flow after capex and dividends. The stable outlook incorporates our view of a supportive regulation in Portugal with the tariff deviation's negative impact partly recovered throughout 2022. The outlook further reflects our view of continuity of the new regulatory period for electricity transmission starting from January 2022. We could lower the rating if REN failed to maintain adjusted FFO to debt above 12% on average. This could result from lower profitability than expected,

...S&P Global Ratings expects REN-Redes Energeticas Nacionais SGPS S.A.'s earnings to continue to benefit from a mostly supportive regulatory framework, although changes are expected under the new electricity regulatory period starting in January 2022. We will assess the impact on REN once regulator Entidade Reguladora dos Servitos EnergTticos's (ERSE's) decision is final. The regulatory framework for electricity is in its eighth period in Portugal, having started in January 2018 and ending in December 2021. The regulatory framework for gas operations in Portugal is in its fifth period, which started in January 2020 and ends in December 2023. Within a regulatory period, we have good visibility on REN's revenue, as it is almost fully regulated, not exposed to market or volume risk, and generated under a supportive regulatory framework. On Oct. 15, ERSE published a draft proposal for tariff and prices for electricity in 2022. We will assess the financial impact of the regulatory changes on REN...

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