Research Update: Naturgy Energy Group S.A. Outlook Revised To Stable From Negative On Improved Financial Headroom; 'BBB/A-2' Affirmed

We view the likelihood of Naturgy Energy Group S.A. (Naturgy) executing project Gemini, which aimed to split the company into a MarketsCo and NetworksCo, as significantly reduced, and now assume it will continue operating on a consolidated perimeter until at least 2025. Although we still lack clarity on Naturgy's long-term strategic direction, our expectation that the company will continue delivering strong financial results over 2023 and 2024 provides sufficient financial headroom to bridge the period until we have more certainty. In addition, we expect that Naturgy's increased financial headroom will allow the group to invest in shifting its generation portfolio toward more renewables, gradually reducing the gap with sector peers. We therefore revised the outlook to stable from negative and

...- We view the likelihood of Naturgy Energy Group S.A. (Naturgy) executing project Gemini, which aimed to split the company into a MarketsCo and NetworksCo, as significantly reduced, and now assume it will continue operating on a consolidated perimeter until at least 2025. - Although we still lack clarity on Naturgy's long-term strategic direction, our expectation that the company will continue delivering strong financial results over 2023 and 2024 provides sufficient financial headroom to bridge the period until we have more certainty. - In addition, we expect that Naturgy's increased financial headroom will allow the group to invest in shifting its generation portfolio toward more renewables, gradually reducing the gap with sector peers. - We therefore revised the outlook to stable from negative and affirmed our '###/A-2' long- and short-term issuer credit ratings on Naturgy. - The stable outlook reflects our view that the Gemini project is now unlikely to be executed and our expectation...

Research Update