14th Mar 2019 16:43
LONDON (Alliance News) - Moody's Investors Service on Thursday affirmed the Baa1 issuer rating and Baa3 junior subordinate rating of Centrica PLC, while the outlook remained stable.
Moody's said the rating action follows the company's preliminary results announcement at the end of February, which reaffirmed the company's disciplined financial policy while signalling the likelihood of weaker cash flow in 2019.
Moody's said the British Gas owner's ratings reflect its leading position in the UK retail energy supply market, its diversification across the UK, Ireland and North America, and its track record of executing cost reductions and asset disposals to bolster its balance sheet.
However, the ratings agency noted that profit and cash flows have weakened for many of Centrica's key businesses in recent years. Retail energy supply in the UK has faced intense competitive pressure, leading to an 18% reduction in energy supply accounts and 16% fall in operating profit from household energy supply since 2015.
Moody's said the Baa1 issuer reflecting reflects the fact that Centrica has achieved steadily improving credit metrics, despite these pressures, as a result of substantial reductions in leverage.
Meanwhile, the stable outlook reflects Moody's expectation that metrics will strengthen from 2020 as a result of announced cost savings and further reductions in net debt following asset disposals planned for 2019.
Looking ahead, the ratings agency said positive rating pressure is not currently anticipated given competitive and regulatory pressures in the UK's retail energy market.
The rating could be downgraded, however, if asset sales reduced the scale and diversification of Centrica's business without a commensurate reduction in leverage.
Centrica shares closed 1.2% lower on Thursday at 120.75 pence each.
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