Moody’s Improves Outlook for Portugal’s REN Owing to New 2021-24 Strategy


Moody’s Investors Service improved the outlook on REN – Redes Energeticas Nacionais, SGPS S.A., whose main shareholder is China State Grid, to positive from stable.

The rating action follows the announcement by REN on 14 May 2021 of an updated strategy for the 2021-24 period, and “reflects Moody’s expectation that the company is likely to maintain a solid financial profile over the period”, according to Moody’s.

Under its new strategy, REN targets to invest EUR200-235 million per annum, which represents a 35% increase relative to the 2015-20 period. Around 75% of this capex will be dedicated to electricity transmission in Portugal (Baa3 positive), notably to connect new renewable generation capacities.

The change in outlook to positive takes account of the existence of various measures to partly finance this capex programme, including (1) direct agreements negotiated with renewable developers covering 3.5 gigawatts of solar capacity and under which developers will fund the
associated network connections; and (2) a revised dividend policy over 2021-24, with a 10% reduction in the dividend floor.

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Moody’s also expects that REN will continue to outperform regulatory assumptions and to benefit from an ongoing reduction in its cost of debt as further debt maturities fall due.

The rating affirmation reflects that REN’s Baa3 ratings continue to be supported by (1) the low business risk profile of its monopoly energy network activities in Portugal; (2) the relatively well-established and transparent regulatory framework under which its tariffs are set; and (3) its diversification across electricity and gas as well as transmission and distribution.

“The ratings could be upgraded if REN appears likely to maintain a stable financial profile following the determination of new electricity transmission tariffs for the regulatory period starting in 2022”, Moody’s adds.

REN — Redes Energeticas Nacionais, SGPS S.A., headquartered in Lisbon, owns and operates under long-term concessions electricity and gas transmission grids as well as a gas distribution network in Portugal. It generated EUR470 million of EBITDA in 2020.

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