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 therefore important that we pursue a credit rating which makes this possible under all circumstances, and that existing and potential capital providers have proper insight into the development of Stedin Group’s creditworthiness.

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 an outlook and a short-term rating. The outlook indicates the expected development of the long-term rating over the coming years.

As at the balance sheet date, Stedin’s credit rating awarded by S&P was A- with a stable outlook for the long term and A-2 for the short term. As a result of the framework agreement between the Dutch State and the regional grid managers Alliander, Enexis and Stedin to enable the State to become a shareholder, S&P classified these regional grid managers as ‘Government Related Entities’ in February 2023. In line with this, S&P upgraded its credit rating by one notch. At the same time, Stedin’s credit rating was downgraded by one notch because of the pressure on the main financial ratios and a challenging investment agenda in the coming years. On balance, Stedin’s long-term credit rating remained the same: A- with a stable outlook.

The most important ratio for Stedin Group is the ratio of Funds from Operations (FFO) to Net Debt, which is a customary ratio in the market for the repayment 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 ratio only at year-end 2023 and 2022.

The calculation of the 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 and financial position between Stedin Group and other businesses. Following Stedin’s classification as a ‘Government Related Entity’, S&P revised the lower limit for the FFO/Net Debt ratio to retain the current credit rating; this ratio should remain ‘comfortably above 9%’. This has resulted in an internal policy adjustment aimed to maintain an annual ratio of at least 10%.

The main adjustment made by S&P was to classify 50% of the perpetual subordinated bond loan as debt (in contrast to the classification under IFRS, whereby this entire bond loan classifies as equity). 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, lease liabilities, net interest paid and tax paid are in accordance with these financial statements.

The FFO/Net Debt ratio increased to 14.0% in 2023. The FFO increase of € 139 million was mainly driven by high costs for network losses, partly incurred in 2022, which have been reimbursed by regulation this year through higher rates. The net debt position at year-end 2023 was € 200 million lower than at year-end 2022, which is mainly due to the share issue and the resulting proceeds of € 500 million.

The FFO/Net Debt ratio of 14.0% is above Stedin’s target of at least 10%, mainly due to one-off events. S&P uses a multi-year (forward-looking) average for its assessment of the FFO/Net Debt ratio.

The S&P rating reports can be found on Stedin Group’s Investor Relations website: http://www.stedingroep.nl/investor-relations. For the latest developments in the credit rating, see 34 Subsequent events