Research Update: Finland-Based Power And Gas Company Fortum 'BBB/A-2' Ratings Affirmed; Outlook Stable

In December 2021, Fortum helped Uniper avoid a liquidity squeeze by providing the subsidiary with €8 billion in credit lines, cementing a track record of financial support from the parent and prompting us to reassess Uniper as core to the group from highly strategic previously. We do not expect the recent support to burden Fortum's credit metrics or debt profile, because we anticipate that the current large cash collateral postings will reduce rapidly over the next three months as hedging contracts unwind, even considering the persisting volatility of commodity and energy prices. Additionally, we expect Fortum's operational performance to remain solid and benefit from favorable electricity market prices, with funds from operations (FFO) to debt at 40%-50% in 2022-2023. We

...- In December 2021, Fortum helped Uniper avoid a liquidity squeeze by providing the subsidiary with 8 billion in credit lines, cementing a track record of financial support from the parent and prompting us to reassess Uniper as core to the group from highly strategic previously. - We do not expect the recent support to burden Fortum's credit metrics or debt profile, because we anticipate that the current large cash collateral postings will reduce rapidly over the next three months as hedging contracts unwind, even considering the persisting volatility of commodity and energy prices. - Additionally, we expect Fortum's operational performance to remain solid and benefit from favorable electricity market prices, with funds from operations (FFO) to debt at 40%-50% in 2022-2023. - We therefore affirmed our '###/A-2' ratings on Fortum. - The stable outlook reflects our view that Fortum benefits from elevated electricity prices and that FFO to debt will be well above our 35% downside threshold....

Research Update