Dams sale boost EDP’s rating, says Moody’s
The financial rating agency explains that the company is below peers in 2019 and should see its financial profile strengthened next year thanks to the operation.
The sale of six dams in the Douro reinforces EDP’s financial profile, according to Moody’s agency. The valuation was released by the financial rating this Monday after the company led by António Mexia announced the deal for 2.2 billion euros.
“The sale of certain water assets in Portugal is positive for EDP – Energias de Portugal’s rating because the revenues will be used to reduce debt and finance the group’s investment plan,” Moody’s explains.
EDP agreed to sell the six dams to a consortium led by the French company Engie, which also includes Crédit Agricole and Mirova, of the Natixis group. The sale was 200 million above the amount indicated by the market and should be completed in the second half of 2020.
Mexia said, after the announcement, that the sale will reduce debt and that the deal would have a positive impact in reducing exposure to energy market prices. Moody’s – which currently evaluates the company at the first investment level (Baa3) agrees: “After the sale, the risk profile of EDP’s business will improve modestly”.
“We estimate that EDP’s credit metrics will be somewhat below 2019 levels, reflecting the low water volumes in the Iberian Peninsula. However, the sale should allow EDP to strengthen its financial profile and show, in 2020, ratios closer to the current Baa3 rating guidance”.
However, for the deal to be closed, the company still has to receive authorization from the government, through the Portuguese Environment Agency and DGEG – General Direction of Energy and Geology, but also from the Competition Authority.
