According to ratings agency Standard & Poor’s, SSE ratings have improved as the company shifts investment towards its networks business.
The company’s credit outlook improved from negative to stable, reflecting S&Ps opinion that SSE will maintain a stable risk profile and operating performance.
The ratings agency supported the company’s performance by mentioning that “a shift in investment toward low-risk regulated networks that will account for 40 per cent-50 per cent of EBITDA”.
They added “In unregulated generation and supply, conditions remain challenging, but we believe there is limited downside from this point,”
The uncertainty following Scotland’s decision in the recent independence referendum to remain a part of the UK is one of the main developments limiting risk for the company.
It is expected the company will benefit from tightening capacity margins and the upcoming capacity auctions given the size of its thermal power fleet in SSE’s generation business.
Meanwhile, its price freeze on retail prices until 2016 “reduces its exposure to political risk” arising from the ongoing probing by the Competition and Markets Authority (CMA) which is set to conclude at the end of next year.
Depending on the action taken by the regulator SSE’s, the ratings agency warned that the outcome of the CMA review could materially impact SSE, and added that a further downgrade is possible.
S&P mentioned that a further upgrade however is unlikely.
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