S&P confirms Naturgy’s debt rating at ‘BBB’ and raises its outlook to stable

The credit rating agency S&P Global Ratings has affirmed the long-term rating of ‘BBB’ to Naturgy and has improved perspective from negative to stable. The firm has based this upward revision on the publication of the company’s strategic plan between 2021 and 2025, which “clarifies the group’s strategic and medium-term growth direction,” as reported in a statement on Monday.

The group aims to accelerate organic growth through a € 14 billion investment plan, of which € 8.7 billion will develop 9.4 gigawatts (GW) of renewable capacity by 2025. On its side, € 4.1 billion will finance investments in regulated gas and electricity networks, mainly in Spain.

With this plan, S&P expects the company to increase its adjusted gross operating profit (Ebitda) at an annual rate of between 6% and 7% between 2020 and 2025. At the same time, the group is recalibrating its capital allocation to accelerating capital spending (capex) and reducing dividends, which S&P sees as key enablers for long-term business and financial sustainability.

No changes after the takeover bid

The rating firm considers that there will be no material changes in the group’s strategy after IFM’s takeover of 22.7% of the energy company, since at most it would acquire a minority stake. In addition, the agency understands that Naturgy executives unanimously approved the strategy.

Regarding the improvement in the company’s outlook, S&P has explained that it reflects its projection that the acceleration of the organic growth of the renewable market, which it expects to contract more and more, will improve the quality of Naturgy’s profits. .

It also shows the agency’s view that the company’s commitment to a ‘BBB’ rating implies a flexible dividend policy and will result in a higher Funds from Operations (FFO) ratio. 18%.