Research Update: Portuguese Electricity And Gas Network Operator REN 'BBB' Rating Affirmed Despite Weaker Credit Metrics; Outlook Stable

Even though we expect REN's revenue to be resilient to the COVID-19 outbreak, the tariff deviation caused by lower electricity and gas demand in Portugal will weigh on cash flows over 2021-2022, notably funds from operations (FFO) to debt remaining below 12%. That said, we believe this would only be temporary, since we expect an improvement in credit ratios from 2023 as tariff deviations are recovered with a two-year lag. Moreover, we anticipate that REN will announce its updated business plan in the first half of 2021, embedding credit protective measures since REN's headroom under the current rating is limited. We are therefore affirming our long- and short-term issuer credit ratings on REN at 'BBB/A-2', and affirming our senior unsecured

...- Even though we expect REN's revenue to be resilient to the COVID-19 outbreak, the tariff deviation caused by lower electricity and gas demand in Portugal will weigh on cash flows over 2021-2022, notably funds from operations (FFO) to debt remaining below 12%. - That said, we believe this would only be temporary, since we expect an improvement in credit ratios from 2023 as tariff deviations are recovered with a two-year lag. - Moreover, we anticipate that REN will announce its updated business plan in the first half of 2021, embedding credit protective measures since REN's headroom under the current rating is limited. - We are therefore affirming our long- and short-term issuer credit ratings on REN at '###/A-2', and affirming our senior unsecured issue rating at '###'. - The stable outlook indicates our view that the company's credit ratios will recover from COVID-19's 2020-2021 impact when a tariff deviation is redeemed in 2022-2023; notably FFO to debt to remain at about 12%....

Research Update