Research Update: Spanish Gas Utility Naturgy Affirmed At 'BBB' Amid Weak Expected Performance And Limited Rating Headroom, Outlook Stable

Naturgy Energy Group's operational performance in 2020 will be hit by a difficult operating environment in its LNG business, declining volumes and power prices, as well as by potentially negative foreign exchange effects. We expect 2020 reported EBITDA could reduce by about €600 million compared to 2019 (€4.6 billion). However, 70% of Naturgy's EBITDA--generated by fully regulated activities in Spain and Latin America--should withstand current market conditions. We are therefore affirming our rating on Naturgy at 'BBB'. The stable outlook indicates that we expect Naturgy's credit metrics to recover in 2021. Risks are to the downside, with an inflexible dividend policy that leaves the company with no headroom for further underperformance. In particular, low gas prices will pressure the profitability

...- Naturgy Energy Group's operational performance in 2020 will be hit by a difficult operating environment in its LNG business, declining volumes and power prices, as well as by potentially negative foreign exchange effects. We expect 2020 reported EBITDA could reduce by about 600 million compared to 2019 (4.6 billion). - However, 70% of Naturgy's EBITDA--generated by fully regulated activities in Spain and Latin America--should withstand current market conditions. - We are therefore affirming our rating on Naturgy at '###'. - The stable outlook indicates that we expect Naturgy's credit metrics to recover in 2021. Risks are to the downside, with an inflexible dividend policy that leaves the company with no headroom for further underperformance....

Research Update