TEXT-Fitch affirms Anglian Water Services Financing debt at 'A'/'BBB+'
Nov 23 - Fitch Ratings has affirmed Anglian Water Services Financing Plc's (AWF) senior secured ratings for its class A debt (both wrapped and unwrapped) at 'A' and its class B debt at 'BBB+'. The Outlooks for the senior secured ratings are Stable. The rating affirmation reflects revenue visibility in the UK water sector until March 2015, sound operational and regulatory performance of Anglian Water Services Limited (Anglian Water), the group's regulated operating company, and adequate financial flexibility considering solid cash flow generation and incremental headroom in comparison to ratio guidelines. Another important aspect is the secured nature of the group's financing structure, which benefits from structural enhancements, including trigger mechanisms (such as dividend lock-up provisions tied to financial, positive and negative covenants) and debt service reserve liquidity. AWF is the debt-raising vehicle of Anglian Water. KEY DRIVERS - Financials Reflect Ratings: Fitch calculates Anglian Water's FYE12 pension-adjusted net debt/regulatory asset value (RAV) at 71.2% (class A) and 83.2% (senior, i.e. consolidated position of class A and class B debt). Fitch expects these ratios to remain comfortably within covenanted levels of 75% (class A) and 85% (senior). Anglian Water's FY12 post-maintenance and post-tax interest cover ratios (PMICRs) are estimated at 1.8x (class A) and 1.5x (senior). Over the five year price control period Fitch forecasts average interest cover of 1.7x (class A) and 1.4x (senior). These financial ratios differ from AWS's investor report. Fitch does not take into account working capital movements in order to calculate PMICR. Also, the agency adjusts the RAV for variation in timing of capital investment and anticipated prospective changes to be made by the regulator, such as logging for the construction output price index. - Good Progress With Regulatory Contract Anglian Water met leakage targets in FY12 and achieved second rank amongst water and wastewater companies for the service incentive mechanism (SIM), a measure that captures quantitative and qualitative performance of customer service. The company reported stable asset serviceability for its networks, apart from wastewater infrastructure that remained marginal due to the number of internal flooding incidents and pollution incidents being higher than the level agreed with Ofwat. Anglian Water is investing an extra GBP7m during FY13 in key areas of the network to prevent sewer blockages. Also, the wastewater network is being gradually upgraded with in-sewer monitors which alert the control centre as blockages build up. After reporting operating expenditure outperformance of around GBP10m for FY11, Anglian Water spent broadly the whole regulatory allowance in FY12. This development reflects inter alia cost pressures from the carbon reduction commitment, the adoption of private sewers and additional resourcing of leakage repair. At the same time, the company is progressing with a variety of smaller scale efficiency initiatives that should allow the business to offset these challenges. RATING SENSITIVITY GUIDANCE: Negative: Future developments that could lead to negative rating action include: An increase of gearing to 74%-75% (class A) and 84%-85% (senior) or reduction of PMICR to below 1.5x (class A) and 1.2x (senior) as calculated by Fitch would attract additional scrutiny from the agency. Also, a marked deterioration in operating and regulatory performance or adverse changes to the regulatory framework could lead to negative rating action. Positive: Future developments that could lead to positive rating actions include: A fundamental reduction in target gearing would be required for positive rating action to occur. LIQUIDITY & DEBT STRUCTURE - Liquidity Adequate Into 2014 As of 31 March 2012, the group had GBP697.8m in cash and cash equivalents and GBP420m of undrawn committed bank facilities (maturing in 2016) available. Additionally, around GBP500m of funding was raised through bonds and US private placements since the balance sheet date. This funding position will provide sufficient liquidity for scheduled debt maturities, capital expenditure, operating requirements and dividends beyond March 2014. Additionally, debt service reserve liquidity of GBP279m and operating and maintenance reserve liquidity of GBP76m is in place in accordance with the group's secured and covenanted financing documentation. Such back-up liquidity is not available for day-to-day operations, but is dedicated for situations of financial distress. Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Additional information is available on www.fitchratings.com. For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary. Applicable criteria, 'Corporate Rating Methodology', dated 8 August 2012, are available at www.fitchratings.com. Applicable Criteria and Related Research: Corporate Rating Methodology
- Obama and Castro shake hands, Zuma humiliated at Mandela memorial |
- Google bus blocked in San Francisco gentrification protest
- Reporter can keep sources secret in Colorado theater shooting: court
- Couple, four children missing in Nevada found safe in canyon
- Regulators seek to curb Wall St. trades with Volcker rule |