L’agenzia di rating ritiene che SMAT sia una società pubblica, dato che il principale azionista è il Comune di Torino (che ha un rating BBB-, con prospettive stabili). L’outlook stabile assegnato a SMAT riflette quello della Città di Torino. Lo “stand alone credit profile di SMAT” (cioè il rating intrinseco della società) è “a+”, il più alto mai visto in Italia tra le società regolate. In particolare, SMAT è regolata da AEEGSI (l'Autorità per l'energia elettrica, il gas e il sistema idrico). SMAT è leader in Italia nel settore dei servizi idrici integrati, in particolare nell’Italia nord-occidentale (Lombardia, Piemonte, Liguria)
• We are assigning Italian water utility Società Metropolitana Acque Torino S.p.A. (SMAT) a 'BBB' long-term issuer credit rating.
• We view SMAT as a government related-entity with respect to its reference shareholder, the City of Turin (BBB-/Stable/--).
• Although we assess the stand-alone credit profile of SMAT at 'a+', our issuer credit rating on SMAT is constrained at one notch above our long-term foreign currency rating on Turin.
• The stable outlook reflects our outlook on Turin.
MILAN (Standard & Poor's) June 26, 2015--Standard & Poor's Ratings Services today assigned its 'BBB' long-term issuer credit rating to Italian water utility Società Metropolitana Acque Torino SpA (SMAT). The outlook is stable.
SMAT is an integrated water service provider operating in the Piedmont region in Italy. It ranks among the leading operators in Italy's water sector, which is highly fragmented. SMAT is under a concession agreement expiring in 2023 and its business is entirely regulated by the national regulatory authority, AEEGSI.
Since SMAT's main shareholder is the City of Turin (BBB-/Stable/A-3), we view SMAT as a government-related entity. The rating on SMAT is therefore constrained by our long-term foreign currency rating on Turin. According to our criteria, domestic utilities like SMAT can be delinked by a maximum of one notch from the related government, provided the utility proves resilient to a stress test in the hypothetical case of a default of the local government, which we believe is the case with SMAT.
We assess the likelihood of potential extraordinary intervention by the local government as "moderate," driven by our assessment of SMAT's:
• "Important" role for the city, as it provides essential infrastructure and services to the provincial area under a concession agreement that expires in 2023.
• "Limited" link with the city, based on our view of the government's limited interference in SMAT's business. This reflects SMAT operating under a regulated regime, which shields it from demand, pricing, and counterparty risk, as well as its governance, which, in our view, limits Turin's capacity to unilaterally push its own interests.
SMAT's anchor is 'a+' derived from the combination of our assessment of a "strong" business risk profile and a "modest" financial risk profile. Our choice of the higher anchor score reflects the inherent strengths of SMAT's business risk profile, in particular as regards its highly predictable cash flow generation.
Our view of SMAT's "strong" business risk profile is further supported by our assessment of its "strong" competitive position in the fragmented Italian water sector, which results from the credit-supportive regulatory framework in which the water utility operates and our view of its strong and resilient profitability. These strengths are mitigated in our opinion by SMAT's low diversification versus European peers and by the uncertain impact on profitability from a potential increase in its scope of operations.
We benchmark SMAT's credit metrics to our low volatility table as the cash flows are generated almost entirely by regulated businesses with a strong regulatory advantage. We assess SMAT's financial risk profile as "modest," based on our projections of adjusted funds from operations (FFO) to debt metrics in the 30%-35% range and adjusted debt to EBITDA in the 2x-3x range over 2015-2018. SMAT's financial risk profile is supported by our expectation that the water utility will generate positive cash flow after capital expenditures and dividends.
The stable outlook reflects the stable outlook of its related government, the city of Turin.
We could downgrade SMAT if we downgraded Turin. In addition, we could downgrade SMAT if we were to assess a significant degradation of its stand-alone credit profile. This could result from either unexpected and material adverse regulatory changes or a deterioration of its financial risk profile following a sizable acquisition. However, both of these events are unlikely, in our view.
The rating is currently constrained at one notch above the long-term foreign currency rating on Turin, which is the maximum notching differential allowed for domestic utilities under our criteria. We could upgrade SMAT following an upgrade of Turin, provided no material change occurred to SMAT's stand-alone credit profile
RELATED CRITERIA AND RESEARCH
Related Criteria
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