Fitch Ratings downgraded from BBB to BBB minus Electrica’s long-term rating and maintained a negative outlook, according to a statement from the financial rating agency.

Electrica’s standalone credit profile (SCP) has also been downgraded from “bbb” to “bbb minus”.

“The rating reflects Electrica’s extremely poor performance in 2021 due to the abnormally high energy acquisition costs required to cover its risk-free supply position and significant grid losses,” the financial rating agency said.

The negative outlook reflects Fitch’s expectations of persistently weak (or negative) generation of funds in operations (FFOs) and poor liquidity.

The negative performance in the fourth quarter of 2021, the negative funds from operations in 2021 and a significant increase in net debt, to 1.1 billion lei, from 0.4 billion lei in 2020, show the major impact of the current market on Electrica. A significant increase in energy prices has massively increased the acquisition costs of the uncovered portion of the supply business risks and the costs required to cover large grid losses, which account for approximately 9% – 10% of distributed energy (approximately 2.1 TWh), according to Agerpres.

Fitch warns that the difficulties facing Electrica will persist in 2022.

“We do not expect an easing of energy prices in 2022, while both supply and distribution are likely to suffer even more negative pressures. We expect Electrica to have to buy energy from the spot market to cover losses in network, while the supply activity will be affected by the continuation of the supply capping mechanism.”

Electrica’s standalone credit profile (SCP) has been downgraded by Fitch from “bbb” to “bbb minus”, which places the company’s long-term rating at the same level as Romania’s sovereign rating.

Due to the negative outlook, a further revision of Electrica’s rating is unlikely, Fitch reports.