SSE has shrugged off a negative outlook rating from Moody’s, which yesterday maintained SSE’s Baa1 rating but changed its outlook to negative. Moody’s cited higher than anticipated leverage and said that even £2bn of planned disposals would be insufficient to maintain a stable outlook over the next 2-3 years.
The ratings agency also cited Ofgem’s draft price control, which proposes deep cuts to transmission operator returns.
“While the final determination, which is due in December 2020, may be different from the draft determination, Moody’s expects these settlements will weaken key credit metrics of the regulated subsidiaries and consequently the wider SSE group,” it stated.
The financial hit from Covid-19 and a potential two-year lag in recovering network revenues also factored in Moody’s decision.
In response SSE suggested the negative outlook is not currently relevant, as it is “unlikely to be requiring significant financing activity in financial markets for the next 2 years”.
Even if it does require additional funds, a Baa1 credit rating “compares favourably to peer companies and allows the company to secure funding at competitive rates”, said FD Gregor Alexander.
He added: “SSE is well-placed to deliver on its £7.5 billion low carbon investment programme over the next five years and has a strong balance sheet, financial discipline and a commitment to credit rating ratios comfortably above those required for an investment grade credit rating.”
Moody’s decision here
SSE’s response here