Research Update: Naturgy Energy Group S.A. 'BBB/A-2' Ratings Placed On CreditWatch Negative On Proposed Split Announcement

On Feb. 10, 2022, Naturgy announced its intention to split into two groups, one bearing all Spanish and Latin American power and gas grid operations (NetworksCo), and a second group including International LNG, Thermal Generation, Supply and Renewables (MarketsCo). However, we understand that no final decision has been made. This is the third significant change in Naturgy's strategy in the past 18 months, which we believe points to below-average governance and an aggressive shareholder focus. It also adds to uncertainty about the company's ability to implement its 2021-2025 strategic plan. We expect management to provide more details on the transaction over the coming months; it has publicly committed to an investment-grade rating and commented on its intention to preserve a

...- On Feb. 10, 2022, Naturgy announced its intention to split into two groups, one bearing all Spanish and Latin American power and gas grid operations (NetworksCo), and a second group including International LNG, Thermal Generation, Supply and Renewables (MarketsCo). However, we understand that no final decision has been made. - This is the third significant change in Naturgy's strategy in the past 18 months, which we believe points to below-average governance and an aggressive shareholder focus. It also adds to uncertainty about the company's ability to implement its 2021-2025 strategic plan. - We expect management to provide more details on the transaction over the coming months; it has publicly committed to an investment-grade rating and commented on its intention to preserve a '###' rating on both entities. However, we would need to evaluate the potential for additional leverage, future investments and policies, as well as notably MarketCo's higher business risk. - We therefore placed...

Research Update