The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today affirmed Haugaland Kraft AS’ A-/Negative issuer rating, the A- senior unsecured debt rating and the S-1 short-term debt rating.

The Negative Outlook remains in place due to Scope's expectation that leverage (debt/EBITDA*) could exceed 2.5x in the coming years. This is mainly due to higher-than-expected growth investments combined with power prices that are more moderate than those observed in 2025.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB (unchanged). Haugaland Kraft’s business risk profile continues to reflect its position as a sizeable, integrated utility company in Norway. The company benefits from diversified cash flow generation through its regulated electricity distribution, fibre networks and related services, as well as its highly profitable and environmentally friendly power production (a positive ESG factor), thanks to its 59.7% ownership of Sunnhordland Kraftlag AS (SKL). The power generation segment, which is primarily hydro-based, contributes significantly to the group’s profitability and diversification. However, substantial fluctuations in market power prices introduce earnings volatility. The recent acquisition of Midtfjellet Vindpark in September 2024 added 150 MW of installed wind energy capacity to SKL’s power production portfolio. This has a mean generation volume of 0.4 TW, around 70% of which is at fixed prices. This reduces power price volatility for this exposure.

Profitability remains a key credit strength, with an EBITDA margin of around 60% placing it among the strongest utilities in its peer group. Following an increase in power prices in 2023 in the NO2 bidding zone, prices moderated in 2024. So far in 2025, power prices have been higher at NOK 747/MWh compared to NOK 562/MWh over the same period in 2024. Scope therefore expects Haugaland’s EBITDA margin to rise to 66% in 2025. However, a moderation in power prices is anticipated, which would see the margin return to around 60% in 2026–2027. Profitability and earnings in regulated distribution and the fibre segment are expected to remain robust. This is due to the more stable nature of these business areas.

Financial risk profile: A- (unchanged). Haugaland Kraft’s financial risk profile is supported by its relatively low leverage, albeit somewhat volatile, and its very high interest coverage. The cash flow generation assessment holds the rating back, as the company’s growth plans exceed its internal financing capacity in the near future, though this remains neutral across the cycle.

Leverage, as measured by debt/EBITDA, has been expected to weaken due to the substantial Midtfjellet Vindpark acquisition, resulting in a ratio of 2.1x at the end of 2024. Power prices in 2025 are significantly higher than anticipated so far and are expected to remain strong for the remainder of the year, providing for a deleveraging driven by strong EBITDA performance to 1.6x, despite SaD expected to increase to NOK 4.8bn from NOK 4.4bn, driven by NOK 300m higher capex than anticipated. Elevated capex in 2026 and 2027, combined with more moderate power price assumptions, will drive leverage up to 2.5x in Scope's forecasts. Interest cover has been solidly above 10x in the past and, despite an expected weakening in 2026–2027 due to increased debt, is expected to remain around 10x, which is a strength for the rating.

Free operating cash flow (FOCF) remains the weakest link in Haugaland’s financial risk profile. The Midtfjellet acquisition pushed 2024 FOCF into negative territory, following a negative 2023 driven by significant tax payments resulting from 2022's performance. Driven by a strong operating performance in 2025, FOCF is expected to be positive again despite an increased capex spending driven by the company's growth ambitions. This is also the reason for an expected negative FOCF over the next two years, with the largest amounts being spent on grid reinforcement and investment in the production portfolio, alongside smaller investments in solar and fibre. Although negative in the short to medium term due to high growth capex, the company's free operating cash flow will remain positive in the long term, reflecting the fact that maintenance capex is consistently covered by internal funds with a healthy margin. This reduces the concern surrounding periods when external financing is required to cover capital expenditure or other strategic investments.

Liquidity: adequate (unchanged). Haugaland Kraft's liquidity is adequate. However, the company will likely require additional funding beyond its internal resources in the coming years to facilitate growth, dividend payments and refinancing. The assessment of adequate liquidity therefore considers Scope's view that Haugaland Kraft has good access to external financing, supported by its solid credit quality and proven ability to access diverse funding from both banks and capital markets. The recent addition of a NOK 600m committed multi-year facility strengthens Scope’s liquidity assessment, serving as a backstop for upcoming maturities. Scope does not factor in the company's short-term overdraft facility in its calculations.

Some of Haugaland Kraft’s loan agreements contain covenants. Scope expects the company to maintain headroom within these covenants in its base case.

Supplementary rating drivers: +1 notch (unchanged). The rating incorporates a one-notch uplift to the standalone credit assessment of BBB+, resulting in a final issuer rating of A-. Scope continues to apply a bottom-up approach under the framework outlined in its Government Related Entities Methodology, reflecting an assessment of the municipal owners’ ability to provide a credit uplift and their willingness to provide financial support if needed. This uplift is consistent with that applied to all other Norwegian regional utilities rated by Scope which are majority-owned by one or more municipalities.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Negative Outlook reflects Scope’s expectation that debt/EBITDA could rise above 2.5x in the coming years due to higher-than-expected growth investments, and the moderating power prices. The Outlook also assumes continued majority municipal ownership.

The upside scenario for the ratings and Outlook is:

1. Debt/EBITDA sustained at or below 2.5x.

The downside scenarios for the ratings and Outlook are (individually):

1. Debt/EBITDA sustained above 2.5x.
    
2. Loss of GRE status (remote)

Debt ratings

The senior unsecured debt rating has been affirmed at A-, the level of the issuer rating.

The affirmed S-1 short-term debt rating is based on the underlying A-/Negative issuer rating and reflects Haugaland Kraft’s adequate access to bank and capital markets financing. The Negative Outlook on the issuer rating continues to exert downward pressure on the short-term debt rating, although the new multi-year credit facility provides some comfort.

Environmental, social and governance (ESG) factors

Haugaland Kraft is mainly exposed to renewable energy generation (mainly hydro) and the distribution of electricity as the sole distribution system operator within its service territory. This position largely rules out transition or stranded asset risk as the long-term utilisation of power plants is secured given their strong position in the merit order and clean carbon footprint. Scope further considers the exposure to large-scale hydropower plants (over 10 MW) as protective for Haugaland Kraft’s government-related entity status given the requirement in Norway of at least two-third public ownership in such assets.

All rating actions and rated entities

Haugaland Kraft AS

Issuer rating: A-/Negative, affirmation

Short-term debt rating: S-1, affirmation

Senior unsecured debt rating: A-, affirmation

*All credit metrics refer to Scope-adjusted figures. 

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

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; European Utilities Rating Methodology, 17 June 2025; Government Related Entities Rating Methodology, 3 September 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Karl Yuan Pettersen, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 24 November 2021. The Credit Ratings/Outlook were last updated on 24 October 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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