The rising carbon price floor will support electricity prices in the coming years and facilitate a permanent switch in the merit order from coal to gas. Plant closures related to the Large Combustion Plant Directive and competitive pressures will reduce reserve capacity margins over the next three years and provide for a more favourable supply demand balance of thermal generation capacity. However, the following aspects need to be taken into account: following payment of a dividend on ordinary shares the coupon on the hybrid securities cannot be deferred, which negates equity credit under Fitch’s methodology.Ĭonsidering some of the market fundamentals, for example the low clean spark spread in comparison to healthy clean dark spread, trading conditions for UK integrated utilities are difficult.
In contrast, the previous issuance in September 2010 of EUR500m and GBP750m of hybrid securities was based upon different terms and conditions, including a look-back provision, i.e. Such ratio forecasts include 50% equity credit for USD700m and EUR750m of hybrid securities issued in September 2012. In the medium-term the agency expects gearing to remain at or below 4.0x. Over the period from 1 April 2012 to 31 March 2013 Fitch expects gearing to reduce to or below 4.0x again, reflecting tariff increases for residential customers implemented over time and restoring the profitability of the combined generation and supply activities. Business activities include almost all stages of the energy value chain, including a diverse generation portfolio and regulated energy networks.įitch calculates funds from operations (FFO) adjusted net leverage of 4.3x and FFO fixed charge cover of 4.0x for the year ended March 2012 (FY12). SSE is an integrated utility, focused on the UK and Ireland. The rating affirmation reflects SSE’s solid business profile as well as its high leverage for the rating level, given management’s commitment to dividend growth in times of high capital expenditure and weak earning dynamics of thermal generation capacity in the UK.
The Outlook for the Long-term IDR is Stable. Oct 03 - Fitch Ratings has affirmed SSE plc’s (SSE) Long-term Issuer Default Rating (IDR) at ‘A-‘, senior unsecured notes at ‘A-‘, subordinated notes at ‘BBB’ and Short-term IDR at ‘F2’.
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