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Standards and Poor’s downgrades Enemalta to B+, outlook negative
Enemalta continues to suffer from significant investment needs, poor profitability, and challenges in passing on rising input costs to consumers in “high tariff environment”.
28 February 2012, 12:00am
Matthew Vella
Matthew Vella
2 min read
Enemalta, which is covered by some 500 million in government-guaranteed loans, has its credit quality constrained by ongoing delays in refinancing its debt.
Credit rating agency Standards and Poor's has downgraded Malta's national energy corporation to B and changed its economic outlook to negative.
The agency said that in 2012 Enemalta could post losses owing to rising oil prices.
S&P said Enemalta, which is covered by some €600 million in government-guaranteed loans, had its credit quality "constrained by ongoing delays in refinancing outstanding debt, leading to a continued extension of debt maturities."
S&P said it anticipated that Enemalta's financial and operational performance may suffer from volatile commodity markets and its inflexible capital expenditure programme.
"We are therefore lowering our long-term corporate credit rating on Enemalta to 'B ' from 'BB'.
"The negative outlook reflects our view that further deterioration of Enemalta's stand-alone creditworthiness may signal weakening government support."
The downgrade reflects S&P's view that Enemalta has become increasingly dependent on financial support from the government because of ongoing delays in the execution of a sustainable refinancing plan.
"We previously anticipated that such a plan would be implemented in 2011, allowing for a gradual recovery of Enemalta's financial risk profile. In addition, the company continues to suffer from significant investment needs, poor profitability, and challenges in passing on rising input costs to consumers in what we view as a high tariff environment."
As a result, S&P revised its assessment of Enemalta's stand-alone credit profile to 'ccc' from 'b-', and revised its assessment of Enemalta's business risk profile to "vulnerable" from "weak," reflecting the company's high cost, exposure to oil prices, ad poor profitability.
S&P also said the already high level of tariffs reduced the likelihood of timely cost-reflective adjustments in high oil price environment.
The agency further added that Enemalta's credit remains constrained by the corporation's "highly leveraged" financial risk profile, based on very weak and volatile credit metrics.
Historically, Enemalta has benefited from state guarantees for most of its debt. In addition, the state has provided guarantees on short notice for the company's bank overdrafts and short-term loans.
The negative outlook reflects S&P's view that any further deterioration of Enemalta's credit profile may signal weakening government support and further constrain the ratings.
"We also believe that, in light of the challenging economic environment, the government may assign lower priority to providing Enemalta with timely and financial support in case of stress.
"Furthermore, the continued delays in refinancing outstanding debt, in our view, constrain the company's financial risk profile, which we already assess as highly leveraged. All these factors could lead us to lower our rating on Enemalta."
S&P said it could revise the outlook to stable if Enemalta successfully improves its profitability and refinances its outstanding debt. These factors depend on the ongoing support from the government.
Matthew Vella, a freelance journalist at MaltaToday, was formerly executive editor at Malt...
Zack Depasquale •
U min sejjer jiehu responsabilita ta'din il-qassata?Jew l-executives ta'din il-kumpanija tajbin biss biex jiehdu bonuses u perkacci ohra imma mhux tajbin biex jiedu responsabilita ta'xihaga li tmur zmerc. Niftakar din il-korporazzjoni fi zminijiet ohra kienet taghmel il-qliegh, nixtieq insaqsi ghaliex l-Enemalta waslet s'hawn? zgur mhux tort tal-poplu ghaliex il-poplu komuni jhallas il-prezzijiet li jizdiedu kull xahar ghal bzonnijiet tal-energija tieghu, u fl-ahhar nixtieq inkun naf forsi xihadd jilluminani u jghidli kif dan id-downgrade sejjer jolqot lill-poplu komuni li diga huwa maghffeg bl-ispejjez ta'din il-korporazzjoni. Imma l-aqwa li Gonzi gab 96% u ressaq lejn Franco Debono. U halluna nghixu.
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Lets be prepared for more higher tariffs, thanks to Standard and Poor and the mismanagment of Enemalta and the ministry under which it serves. Yes we are getting poor and poorer.
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Standards and Poor's are worried about Eene Malta. We are more worried about our standard of living. Since we joined the Elite's Club our lives have been downgraded to JUNK by the Hon Prime Minister and his untalented bunch.
History repeats itself. We are back into the sixties.
Thank God we will soon have the General Elections and hopfully the New Labour Government will lead the Nation back to Progress as was seen in the seventies.
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Anqas niflah izjed nisma ahbarijiet mudlama ta dan it-tip! Fl-ahhar tal-gimgha kellna ahbar tajba li Gonzi gab 96% tal-voti; imma nghid jien la Gonzi hu daqshekk tajjeb,u bravu, ir-ratings ta Malta u Ene Malta kif niezlin l-isfel u mhux jitilghu l'fuq qeghdin? GonziPN irid idahhal f'rasu, u f'ras hafna Nazjonalisti, li bit-tejatrini, ir-ratings mhux se jitilghu l'fuq,anzi, aktar jaghti x'jifhem lil Credit Agancy barranin , kemm m'hawx serjeta f'dan il-pajjiz!
