Moody’s changes outlook on Romania’s Transelectrica from negative to stable

Ratings agency Moody’s has affirmed on February 4 Transelectrica’s Ba2 long-term corporate family rating and Ba2-PD probability of default rating, while changing the outlook from negative to stable. “Transelectrica's stabilized outlook reflects progress made by the company to strengthen its liquidity position, notably bolstered by the RON 200 million bond issued in December 2013 that helped to reduce a reliance on short-term bank debt," said Nicholas Stevens, Moody's lead analyst for Romania’s Transelectrica. However, Stevens added that the Romanian company “still has some work to do in order to create a structurally stable liquidity base, such as signing material multi-year committed liquidity facilities, but it has now accessed the domestic bond market and is expected to repeat this in the latter half of 2014”. Transelectrica has relied on development bank funding for defined capital projects, making up the majority of outstanding debt, and relatively shorter term bank finance in order to fund its ongoing capital expenditure program. In Moody’s opinion, this reliance on bank finance, in absence of committed bank facilities, exposes the company to liquidity risk in the event of any market disruption, reads the statement of the agency. Also, by accessing domestic investors through public bond issuance, Transelectrica diversified its funding sources, being now sufficiently funded for the capital program over the next 15 months. In 2013, the company has showed a stabilization in its financial performance benefiting from favorable generation reserve operations, improved tariffs, and a reduction in the cost of grid losses, according to Moody’s. Given Transelectrica’s majority ownership by the Romanian government, the company falls within the scope of Moody's rating methodology for government-related issuers (GRIs). However, in case the rating for the government of Romania (Baa3, negative) would be downgraded, this would not necessarily result in a downgrade of Transelectrica's own rating. But given the negative outlook on the Romanian sovereign rating, Moody's would not expect to upgrade Transelectrica's rating in the near future, according to the ratings agency. The Romanian electricity carrier Transelectrica is majority owned by the state via the Public Finance Ministry (58.7 percent), while investment fund Fondul Proprietatea has a 13.5 percent share package and SIF Oltenia some 6.8 percent. Irina Popescu, irina.popescu@romania-insider.com