Moody’s nicks National Grid

Moody’s Investors Service said it downgraded to Baa2 from Baa1 the issuer and senior unsecured ratings on National Grid plc. Moody’s also downgraded to Baa2 from Baa1 the issuer ratings of the group’s U.S. intermediate holding companies, National Grid North America Inc. and National Grid USA. In all cases, the agency changed the outlook to stable from negative.

Concurrently, Moody’s lowered to Baa1 from A3 the ratings of all the group’s operating subsidiaries in the United Kingdom. The affected entities are National Grid Electricity Transmission plc, National Grid Gas plc, National Grid Electricity System Operator Ltd., Boston Gas Co., Massachusetts Electric Co. and Narragansett Electric Co. For all these entities, Moody’s changed the outlook to stable from negative.

Moody’s also affirmed New England Power Co.’s A3 issuer and senior unsecured ratings and maintained the stable outlook.

The agency also changed the outlook to negative from stable on the Brooklyn Union Gas Co. and affirmed its Baa1 issuer and senior unsecured ratings. No rating action was taken on the group’s two other New York subsidiaries, KeySpan Gas East Corp. and Niagara Mohawk Power Corp., which both have negative outlooks.

Moody’s also took related rating actions on NGG Finance plc and British Transco International Finance BV.

“The downgrade of National Grid plc’s issuer and senior unsecured ratings to Baa2 from Baa1 reflects Moody’s expectation that the group will not maintain a financial profile in line with the rating agency’s minimum guidance for the Baa1 rating level over at least the next two to three years under the group’s strategy and updated financial policy,” Moody’s said in a press release.

National Grid announced it will continue to invest in its U.K. investment program. “Moody’s expects investment levels to remain below those in the U.S., and has previously guided to average growth in the group’s regulated assets of 5-7% per annum over the medium term,” the agency said.

The company said it plans to maintain shareholder distributions by continuing to raise the dividend at least in line with inflation over the medium term.

“Both factors, coupled with substantial debt at various holding companies and U.S. tax reform, have depressed cash flow metrics in recent years with the group exhibiting retained cash flow (RCF) to net debt just above 9% in fiscal years ending March 2019 and March 2020,” Moody’s said.

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