Research Update: Finland-Based Fortum Upgraded To 'BBB+' On Prudent Balance Sheet And Financial Policy; Outlook Stable

Nordic power generator Fortum Oyj will maintain its strong balance sheet, according to our projections of S&P Global Ratings-adjusted EBITDA of 1.0x-1.3x over 2024-2026, even though we expect that softer power prices will reduce the group's annual EBITDA to €1.6 million-€1.4 billion over the same period, from €1.9 billion in 2023. We expect Fortum's funds from operations (FFO) to debt to remain at 60%-80% on the back of management's disciplined approach to investment and expansion at pace with demand growth, without any major acquisition. Positively, Fortum has already decarbonized most of its generation. We therefore raised our long-term ratings on Fortum and its senior unsecured debt to 'BBB+' from 'BBB', and we affirmed the 'A-2' short-term rating on the company.

...- Nordic power generator Fortum Oyj will maintain its strong balance sheet, according to our projections of S&P Global Ratings-adjusted EBITDA of 1.0x-1.3x over 2024-2026, even though we expect that softer power prices will reduce the group's annual EBITDA to 1.6 million-1.4 billion over the same period, from 1.9 billion in 2023. - We expect Fortum's funds from operations (FFO) to debt to remain at 60%-80% on the back of management's disciplined approach to investment and expansion at pace with demand growth, without any major acquisition. Positively, Fortum has already decarbonized most of its generation. - We therefore raised our long-term ratings on Fortum and its senior unsecured debt to '###+' from '###', and we affirmed the 'A-2' short-term rating on the company. - The stable outlook indicates our assumption Fortum will sustain S&P Global Ratings-adjusted FFO to debt comfortably above 40% despite a fairly aggressive dividend policy and expectations about continued volatile power price....

Research Update