Rating action

Scope Ratings affirms its BBB corporate issuer rating on Glitre Energi AS, as well as its S-2 short-term rating and BBB senior unsecured ratings.

Rating rationale

The issuer rating continues to be driven by Glitre’s meaningful share of monopolistic grid operations and relatively stable overall profitability and cash flow. Cash flow is supported by the substantial hedging of the company’s more volatile power generation business.

Scope views Glitre’s positive free operating cash flow as supportive of its overall financial risk profile. Average Scope-adjusted debt (SaD)/EBITDA of around 3.6x and debt protection ratios of above 7x, outperformed Scope’s previous estimates slightly.

Liquidity remains sufficient and covers short-term debt maturities well, supported by a newly refinanced NOK 1.0bn long-term credit line that remains undrawn, available cash and access to bond and bank debt.

The Stable Outlook reflects Scope’s expectations that Glitre will: i) continue to be a diversified utility, with operations in power production, distribution and sales; ii) be able to fund its medium-term planned capex programme using internally generated cash flow; and iii) reduce volatility via power production hedging.

The issuer rating includes a one-notch uplift for ownership support in accordance with our government related entities methodology.

Rating-change drivers

A positive rating action could be warranted if Glitre were to materially increase the share of its distribution business or deleverage to a SaD/EBITDA level below 3.0x on a sustainable basis.

A negative rating action is possible if the company were to participate in a debt-financed structural transaction that either substantially weakened its business risk profile or resulted in a SaD/EBITDA of well above 4x and prolonged negative free operating cash flow generation.

The full rating report, including the rating rationale and analytical details, is available at www.scoperatings.com or HERE.

Stress testing & Cash flow analysis
No stress testing was performed. Scope performed its standard cash flow forecasting for the company. 

Methodology
The methodologies used for this rating and rating outlook (Corporate Rating Methodology 2018, European Utilities Methodology 2018, Government Related Entities 2018) are available on www.scoperatings.com.
Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity, third parties and Scope internal sources.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Henrik Blymke, Managing Director
Person responsible for approval of the rating: Werner Stäblein, Executive Director
The ratings/outlooks were first released by Scope on 04.01. 2018.

Potential conflicts
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
© 2018 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstrasse 5 D-10785 Berlin.
Scope Ratings GmbH, Lennéstrasse 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director: Torsten Hinrichs.