RO utility Electrica gets one notch above sovereign from Fitch

Romanian electricity distribution and supply holding Electrica, 49%-controlled by the state, has received a BBB (stable) Issuer Default Rating (IDR) from Fitch Ratings, one notch above the country’s sovereign rating (BBB-).

This was possible thanks to Electrica's weak links with its main shareholder, the Romanian state.

The company operates three of Romania’s eight regional electricity distribution networks and an electricity supply firm that serves the whole country.

Electrica has decided to apply for an issuer rating from one of the three major rating agencies as it is evaluating several options to diversify its financing sources for business development and the ambitious investment plan, according to the group’s representatives.

The rating reflects Electrica's resilient business profile with 80%-85% of EBITDA coming from regulated and fairly predictable electricity distribution and a strong financial profile, Fitch explained.

Notably, Fitch does not rate Electrica's existing or prospective debt. It expects most debt to be taken by the three distribution subsidiaries without guarantees from Electrica, which would make creditors at Electrica level structurally subordinated (of lower priority) to those at subsidiaries.

A potential future rating of debt at the Electrica level would then consider the ratio of prior-ranking debt at subsidiaries to total debt in Electrica's group and could be notched down from the IDR in case of excess levels of prior-ranking debt.

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