Danish power firm Dong Energy has been given a “BBB+/A-” rating riding on the winds of a strong financial performance since switching focus to renewables.
French credit agency S+P Global has affirmed the long- and short-term corporate credit ratings due to ongoing revenue and EBITDA growth in the firm’s subsidized offshore wind project
The Paris based agency also highlighted the company’s solid performance of the Distribution and Customer Solutions division following renegotiation of gas contracts.
S+P expects the planned sale of oil and gas operations to support Dong’s new core wind power business and said the rating reflects a “stable outlook” on the renewables market.
The ‘BBB+’ rating was also affirmed on the company’s senior unsecured issues and a ‘BB+’ rating on its subordinated hybrid issues.
In a statement S+P said: “The affirmation follows continuous improvement in the company’s financial performance, as well as revenue and EBITDA growth in the company’s subsidized offshore wind projects.
“This, coupled with the renegotiation of gas purchase contracts, which has strongly benefitted the Distribution and Customer Solutions division, led to stronger credit measures than our projections for 2016, with funds from operations (FFO) to debt at 66.1% versus 37.5% in 2015.
“The company is also likely to divest its oil and gas assets, although the timing and financial impact is yet unknown. These factors could result in DONG Energy’s credit measures remaining stronger than expected for the ‘bbb’ stand-alone credit profile and ‘BBB+’ ratings in the near term.”
S+P said Dong’s expansion into offshore wind projects, while selling oil and gas assets, would probably result in negative free cash flow after capital expenditures and dividends in 2017.
The divestment of its oil and gas assets was seen as a positive given the segment’s “poor performance in the recent past”.
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