Credit rating

33 Credit rating

A key pillar in Stedin Group’s financial policy is to maintain good access to the available sources of financing, including the money and capital markets. It is important to that end that existing and potential capital providers have proper insight into Stedin Group’s credit rating.

Stedin Holding N.V. and Stedin Netbeheer B.V. each have a credit rating with the rating agency Standard & Poor’s (S&P). This rating consists of a long-term rating with outlook and a short-term rating. The outlook indicates the expected change in the long-term rating for the coming years.

As at the balance sheet date, Stedin’s credit rating awarded by S&P is A- with a stable outlook for the long term and A-2 for the short term. This rating is unchanged from 2021. For the latest developments regarding the credit rating, see note 34 Subsequent events.

The most important ratio for Stedin Group is the ratio of Funds from Operations (FFO) to the Net Debt ratio for freely available cash and cash equivalents (net debt), which is a customary ratio in the market for the sustainability of debt. S&P applies a multi-year average of this ratio as part of its assessment of the credit rating. Stedin Group presents this figure only at year-end 2022 and 2021.

The calculation of this ratio follows the figures in these financial statements, supplemented with the adjustments applied by S&P. These analytical adjustments are made in order to enhance the comparability of the figures as well as the financial position between Stedin Group and other businesses. The main adjustment concerns the perpetual subordinated bond loan as an instrument with a 50% equity component and a 50% debt component (in contrast with IFRS, where it is part of equity in its entirety). In addition, pension liabilities are included in the S&P definition of debt.

The calculation is set out in the table below:

Current and non-current interest-bearing debt, interest paid and tax paid in accordance with these financial statements. Lease liabilities are part of non-current interest-bearing debt and are presented separately for comparative purposes.

The FFO/Net Debt ratio decreased to 10.1% in 2022, from 11.3% in 2021. The decrease of the FFO by €14 million is mainly driven by high costs for network losses. The net debt position (Net Debt) at year-end 2022 is €268 million higher than in 2021, which can be explained by the raising of a new green bond of €500 million and the regular repayment of part of an old loan of €300 million.

The annual FFO/Net Debt ratio of 10.1% is below the target of at least 12%. However, S&P uses a multi-year (forward-looking) average for its assessment of the FFO/Net Debt ratio. Stedin has for some time been working on strengthening its balance sheet through consultation with the central government and new and current (regional) shareholders and has confidence in the (future) outcome. Stedin therefore regards the current lower rating as a temporary situation. For the latest developments regarding the credit rating, see note 34 Subsequent events.

The tax paid is €18 million higher in 2022 as a result of a higher profit. The higher operating profit was partly attributable to higher capitalised own production.

S&P adjustments can be viewed in the S&P rating report of November 2021 (which is available via the Investor Relations website) on the basis of figures in the 2020 financial statements. For the most recent rating reports, see our website: http://www.stedingroep.nl/investor-relations.