Scope Ratings is proposing an update of its European Utilities Rating Methodology and is calling for comments from market participants until 17 February 2023. Simultaneously, Scope is proposing the retirement of its Renewable Energy Corporates Rating Methodology, intending for affected corporates to be assessed under the European Utilities Rating Methodology.

The proposed methodology can be downloaded here or on www.scoperatings.com.

Rating impact

The methodology as proposed might have a limited impact on outstanding ratings, with mostly a positive rating impact.

Key proposed changes

Besides editorial changes, the proposed updates are as follows:

• Expanding the rating approach to renewable energy corporates by incorporating key methodological elements from the Renewable Energy Corporates Rating Methodology, which Scope intends to withdraw
   
• Extending the guidance on the assessment of business risk profiles, including the ‘A’ and ‘AA and above’ categories for market position and diversification and profitability as well as the ‘CCC and below’ categories for profitability
   
• Adding two new rating criteria for the assessment of the market position of electricity-generating utilities, related to recurring production volumes and the position of generation assets in the merit order and their carbon intensity
   
• Recalibrating the category thresholds for the assessment of a utility’s profitability as measured by the Scope-adjusted EBITDA margin; introducing the profitability measure of Scope-adjusted ROCE (return on capital employed) for integrated utilities and energy-generating utilities
   
• Extending the guidance on the assessment of the financial risk profile for leverage, debt protection and capex coverage to the ‘AA and above’ and the ‘CCC and below’ categories and recalibrating the quantitative rating ranges
   
• Improving transparency on Scope’s view on the debt exposure to asset retirement obligations, margining deposits and non-recourse debt

Call for comments

Scope invites issuers, investors and other interested parties to comment on the proposed methodology by 17 February 2023, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.

Please send your comments to consultation@scoperatings.com.

Scope will review and publish the content of written responses in accordance with regulatory requirements unless the respondent has explicitly requested confidentiality and will publish the final version of the methodology thereafter.