FRIDAY, 17/03/2023 - Scope Ratings GmbHDownload PDF
Scope updates its European Utilities Rating Methodology
The methodology is now final following a call-for-comments period and will apply to all issuer and debt ratings of corporates in the sector. The application of the methodology will likely have a positive impact on a limited number of outstanding ratings.
The update of the methodology will have a positive impact on a small number of issuer and debt ratings in scope of the methodology.
Besides editorial changes, with this update Scope
- extended the scope of the methodology to renewable energy corporates, such as independent power producers, and subsequently withdrew the Renewable Energy Corporates Rating Methodology;
- extended guidance on the assessment of business risk profiles;
- introduced new rating factors used for the assessment of a utility’s business risk profile, i.e. measuring a recurring level of power generation and measuring a return on capital employed as well as assessing the quality of a power generation fleet and the position in the merit order for electricity-generating utilities;
- recalibrated the thresholds for leverage and debt protection and their extension to the ‘AA and above’ and ‘CCC and below’ categories;
- recalibrated the rating ranges for the qualitative assessment of a utility’s capex coverage;
- provided further guidance on Scope’s view on the debt exposure to asset retirement obligations, margining deposits and non-recourse debt;
- added an appendix providing more detail on the criteria of notching when applying the bottom-up approach of Scope’s Government Related Entities Rating Methodology.
Scope did not receive comments from market participants during the request-for-comments period, which expired on 17 February 2023.
Download the updated methodology here or on www.scoperatings.com.