United Utilities Group PLC - LEI: 2138002IEYQAOC88ZJ59
United Utilities PLC - LEI: 213800KYT12UFB2VE455
United Utilities Water Finance PLC - LEI: 213800313INX42GDLR44
United Utilities Water Limited - LEI: 213800RQ5FMB2GQ69174
Credit Rating Downgrade from S&P
United Utilities notes the decision of S&P Global Ratings ("S&P") to downgrade United Utilities PLC's ("UU's") and United Utilities Water Limited's ("UUW's") credit ratings one notch which was announced on 25 February 2020.
Following the announcement, S&P's long-term issuer credit ratings for UUW and UU have been downgraded from A- to BBB+ (stable outlook) and BBB+ to BBB (stable outlook), respectively, and for Notes issued by UUW and UU have been downgraded from A- to BBB+ and BBB to BBB-, respectively.
Commenting on the ratings action from S&P, Russ Houlden, Chief Financial Officer of United Utilities Group PLC ("UUG"), said:
"On 29 January 2020, when we announced acceptance of the Final Determination in respect of Ofwat's PR19 price review, we also announced the group's dividend policy, capital structure and credit ratings targets for the AMP7 regulatory period.
"We have consistently maintained a robust capital structure, with UUG gearing, measured as group net debt to regulatory capital value ("RCV"), remaining stable over the last ten years and comfortably within our target range of 55 to 65 percent. We confirmed that we would retain this target range over AMP7 in order to maintain efficient access to debt capital markets throughout the economic cycle.
"With regard to credit ratings targets, we announced that assuming no significant changes to existing ratings agency methodologies or sector risk assessments, the group aims to maintain a long-term issuer credit rating for UUW of at least A3 with Moody's, a senior unsecured debt rating for UUW of at least A- with Fitch, and a long-term issuer credit rating for UUW of at least BBB+ with S&P. We also said that we expected S&P to resolve its negative outlook on the group's ratings (that was assigned in August 2019) during February 2020.
"Both Moody's and Fitch use net debt to RCV along with an interest cover ratio as their primary credit metrics. In taking its ratings action today, we recognise that S&P has considered the likely impact of the PR19 Final Determination on its primary credit metric - adjusted funds from operations ("FFO") to net debt - and has concluded that FFO to debt is likely to be sustained at a level commensurate with assigning a BBB+ rating for UUW, which is in line with our target. It is differences in the respective ratings agency methodologies which gives rise to us targeting an A3 rating with Moody's, a senior unsecured debt rating of A- with Fitch, and a rating of BBB+ with S&P for UUW.
"This package of credit ratings means that UUW is one of the highest rated companies in the UK water sector, highlighting our robust credit quality, which should secure continuing efficient access to funding in the debt capital markets."
For further information, please contact Brendan Murphy, Treasurer, United Utilities Group PLC, on 0345 070 2426.
United Utilities Group PLC's ordinary shares trade on the London Stock Exchange and its ADRs, each equal to two ordinary shares, trade over the counter under the Trading Symbol 'UUGRY'.
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