Summary:
N.V. Nederlandse Gasunie
Primary Credit Analyst:
Beatrice de Taisne, CFA, London (44) 20-7176-3938; [email protected]
Secondary Contact:
Alf Stenqvist, Stockholm (46) 8-440-5925; [email protected]
Table Of Contents
Rationale
Outlook
S&P Global Ratings Base-Case Scenario
Business Risk
Financial Risk
Liquidity
Government Influence
Ratings Score Snapshot
Related Criteria And Research
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Summary:
N.V. Nederlandse Gasunie
Business Risk: EXCELLENT
aaVulnerable
Excellent
a
a-
AA-/Stable/A-1+
Financial Risk: INTERMEDIATE
Highly leveraged
CORPORATE CREDIT RATING
Minimal
Anchor
Modifiers
Group/Gov't
Rationale
Business Risk: Excellent
Financial Risk: Intermediate
• Focus on low-risk, regulated gas transmission
operations in The Netherlands and northern
Germany.
• Natural monopoly position in the Dutch natural gas
market as the national gas transportation and
infrastructure company.
• Increasing revenues from new assets, although
overall revenue is expected to decline.
• Recovering credit metrics following the end of an
obligation to repay part of previously charged tariffs
to customers (the repayment obligation).
• Sizable, partially debt-financed capital expenditure
(capex) program exceeding €1.2 billion over
2016-2018.
• Supportive owner in the State of The Netherlands,
underpinned by reduced dividends since 2010.
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Summary: N.V. Nederlandse Gasunie
Outlook: Stable
Our stable outlook on Gasunie reflects that on the sovereign, and our opinion that a rating action or outlook
revision on Gasunie's 100% owner, The Netherlands, would likely result in a similar action on Gasunie. We believe
that a track record of improving credit metrics, combined with a continued stable regulatory framework, could lead
to a revision of the company's stand-alone credit profile (SACP) to 'a' from 'a-'. However, all else being equal, this
would not lead to a rating change because a one-notch movement of the SACP would not affect our issuer credit
rating on Gasunie, under our criteria.
Downside scenario
We could lower the ratings on Gasunie if we downgraded the sovereign or if we revised down Gasunie's SACP by
one-notch. We do not currently consider this likely given the company's strong financial performance. We would
likely lower the ratings on Gasunie if its funds from operations (FFO) to debt declined sustainably below 13%.
Upside scenario
The potential for a positive rating action is limited, as it would result from a three-notch increase in Gasunie's
SACP to 'aa-'. This could happen, however, if regulatory stability and visibility sustainably improved, supporting
our view of the company's regulatory assessment, and if Gasunie's adjusted FFO to debt sustainably stabilized to at
least 23%.
S&P Global Ratings Base-Case Scenario
Assumptions
Key Metrics
Our base case reflects the following assumptions:
• Revenues will decrease due to the efficiency
discounts required by the Dutch and German
regulator, no longer compensated by revenues from
new assets.
• Capex of about €1.2 billion over 2016-2018.
• After 2015, the FFO is expected to decrease due to
tariff discounts imposed by the regulators, partly
compensated by contributions of new assets.
• Dividends pay-out of 60% over 2015-2017.
FFO/debt (%)
Debt/EBITDA (x)
DCF/debt (%)
2016e
2017e
2018e
19-20
18-19
17-18
3.5-4.5 4.0-4.5 4.0-4.5
0-3
(2)-2
(2)-2
S&P Global Ratings-adjusted figures. e—Estimate.
FFO--Funds from operations. DCF—Discretionary
cash flow.
S&P Global Ratings base case:
• Gradual decrease in debt due to positive cash flows.
• FFO to debt comfortably at 18%.
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Summary: N.V. Nederlandse Gasunie
Business Risk: Excellent
Our assessment of Gasunie's excellent business risk profile primarily reflects our view of the gas transmission sector's
very low industry risk and The Netherlands' very low country risk. Gasunie's status as The Netherlands' only gas
transmission and system operator (TSO) and as Northern Germany's TSO, its monopolistic positions under the Dutch
and German regulatory regimes--which we deem supportive--and its low level of earnings volatility, support our
assessment of the company's excellent competitive position. In our view, the interference in 2011 relating to the
determination of the company's regulated asset base in The Netherlands, the harsh cuts on returns in the 2014-2016
regulatory period, and the company's expansion into midstream activities weaken the business risk profile and is
reflected in a one-notch downward adjustment to the SACP.
Financial Risk: Intermediate
Our assessment of Gasunie's intermediate financial risk profile incorporates the low volatility of the company's cash
flows. We benchmark Gasunie's credit measures against our low volatility table. The financial risk profile is
underpinned by the company's strengthening credit metrics and our expectation of positive and growing discretionary
cash flow, on the back of structurally declining capex, as gas infrastructure in The Netherlands is now mature.
There are, however, some likely pressure on the company's financial profile post-2017, when a new regulatory period
starts in The Netherlands.
Liquidity: Adequate
The short-term rating is 'A-1+'. We assess Gasunie's liquidity position as adequate, supported by our view that
Gasunie's liquidity resources will exceed its funding needs by more than 1.1x in the 12 months from March 31, 2016,
including debt issued in May 2016.
Principal Liquidity Sources
Principal Liquidity Uses
• A cash balance of close to €60 million as of March
31, 2016;
• A debt issuance of €650 million in May 2016;
• Our expectation that Gasunie will generate FFO of
about €764 million; and
• Access to €750 million in an undrawn committed
credit maturing after 12 months.
• Expected capex of close to €325 million over the
next 12 months;
• Working capital outflow of close to €44 million
• €1.5 billion in debt maturing in the next 12 months.
Covenant Analysis
The credit facility contains covenants that require Gasunie to comply with the Financial Management Grid Operator
Decree (Besluit financieel beheer netbeheerder; published July 26, 2008, by the Dutch Ministry of Economic Affairs).
The decree includes financial criteria applicable to Dutch network operators--including minimum credit ratings of at
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Summary: N.V. Nederlandse Gasunie
least 'BBB' (or equivalent). Gasunie is comfortably within the covenant headroom with an S&P Global Ratings' credit
rating of 'AA-', five notches above the minimum threshold of 'BBB'.
Government Influence
We base our ratings on Gasunie on the company's SACP, which we assess at 'a-', and our opinion that there is a high
likelihood that the government of The Netherlands would provide timely and sufficient extraordinary support to
Gasunie in the event of financial distress, which raises the SACP by two notches.
Our view that there is a high likelihood of extraordinary government support is based on our assessment of Gasunie's:
• Very important role for the Dutch government, given the group's strategic importance as the sole owner and
operator of the regulated high-pressure gas transmission network in The Netherlands. Gasunie plays an important
role in implementing the Dutch government's policy of enhancing the gas infrastructure networks in the country and
in securing the country's supply of gas; and
• Strong link with the state, based on our opinion that the state will likely retain majority ownership of Gasunie. This
also reflects the fact that the state is involved in Gasunie's strategic decisions, but that management is generally
independent and makes autonomous business decisions.
Ratings Score Snapshot
Corporate Credit Rating
AA-/Stable/A-1+
Business risk: Excellent
• Country risk: Very low
• Industry risk: Very low
• Competitive position: Excellent
Financial risk: Intermediate
• Cash flow/Leverage: Intermediate
Anchor: a
Modifiers
• Diversification/Portfolio effect: Neutral (no impact)
• Capital structure: Neutral (no impact)
• Financial policy: Neutral (no impact)
• Liquidity: Adequate (no impact)
• Management and governance: Satisfactory (no impact)
• Comparable rating analysis: Negative (-1 notch)
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Summary: N.V. Nederlandse Gasunie
Stand-alone credit profile : a-
• Related government rating: AAA
• Likelihood of government support: High (+3 notches from SACP)
Related Criteria And Research
Related Criteria
•
•
•
•
•
•
•
•
•
•
•
•
•
Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
Key Credit Factors For The Regulated Utilities Industry, Nov. 19, 2013
Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
Industry Risk, Nov. 19, 2013
Group Rating Methodology, Nov. 19, 2013
Corporate Methodology, Nov. 19, 2013
Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
Methodology For Linking Short-Term And Long-Term Ratings For Corporate, Insurance, And Sovereign Issuers,
May 7, 2013
Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012
Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
Use Of CreditWatch And Outlooks, Sept. 14, 2009
2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Related Research
• Netherlands-Based Gas Company Gasunie Ratings Raised To 'AA-/A-1+' After Sovereign Upgrade; Outlook Stable;
Nov. 25, 2015
Business And Financial Risk Matrix
Financial Risk Profile
Business Risk Profile
Minimal
Modest
Intermediate
Significant
Aggressive
Highly leveraged
Excellent
aaa/aa+
aa
a+/a
a-
bbb
bbb-/bb+
aa/aa-
a+/a
a-/bbb+
bbb
bb+
bb
Strong
Satisfactory
a/a-
bbb+
bbb/bbb-
bbb-/bb+
bb
b+
bbb/bbb-
bbb-
bb+
bb
bb-
b
Weak
bb+
bb+
bb
bb-
b+
b/b-
Vulnerable
bb-
bb-
bb-/b+
b+
b
b-
Fair
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