Research Update: Floene Energias Affirmed At 'BBB-' On Stable Credit Metrics And Continuity Of Regulatory Framework; Outlook Stable

We expect Floene Energias will continue to post stable earnings in the new 2024-2027 regulatory period, supported by continuity in the supportive regulatory framework in Portugal. We anticipate one-off costs due to the carve-out from former owner Galp--alongside c. €11 million yearly special tax and higher average cost of debt--to weaken Floene's adjusted debt to EBITDA to about 6.8x and funds from operations (FFO) to debt to 9.7% on average in 2024-2025 (10.3% in 2023 ). We expect Floene will continue to follow a financial policy that supports an investment-grade rating by reducing leverage before the 2028-2031 regulatory period begins. We therefore affirmed our 'BBB-' long-term issuer credit rating on Floene and our 'BBB-' issue rating on its debt. The

...- We expect Floene Energias will continue to post stable earnings in the new 2024-2027 regulatory period, supported by continuity in the supportive regulatory framework in Portugal. - We anticipate one-off costs due to the carve-out from former owner Galp--alongside c. 11 million yearly special tax and higher average cost of debt--to weaken Floene's adjusted debt to EBITDA to about 6.8x and funds from operations (FFO) to debt to 9.7% on average in 2024-2025 (10.3% in 2023 ). - We expect Floene will continue to follow a financial policy that supports an investment-grade rating by reducing leverage before the 2028-2031 regulatory period begins. - We therefore affirmed our '###-' long-term issuer credit rating on Floene and our '###-' issue rating on its debt. - The stable outlook indicates that we expect the group to maintain S&P Global Ratings-adjusted FFO to debt above 9% and gradually increase this metric to approach 12% by 2027....

Research Update