Moody’s Investors Service announced on Tuesday that it downgraded to Baa2 from Baa1 the issuer rating and the senior unsecured ratings of Estonia's state-owned energy giant Eesti Energia AS, informs LETA.
Concurrently, Moody’s has affirmed the short-term P-2 rating of Eesti Energia. The outlook on the ratings is stable.
Moody’s said that the rating action reflects the development of Eesti Energia's business risk profile in light of the increasing integration of the Baltic and Nordic power markets, coupled with generally weak levels of wholesale power prices and challenges associated with the development of shale oil activities.
While Eesti Energia's rating is underpinned by the group's dominant position in Estonia as a vertically-integrated utility, the company's small scale and concentration on its CO2-intensive oil-shale-based generation portfolio constrain its rating, Moody’s said. In the short term, Eesti Energia's hedging strategy will help protect its earnings from the effects of weak power prices. Moreover, the company will further benefit from the current low CO2 prices. However, Moody’s considers that the competitive position of Eesti Energia's oil-shale-based generation assets may weaken over time as the market becomes more integrated with the Nordic region, which has a more diversified generation base. This integration will follow the coming on line of the Estlink2 additional cable connection to Finland this year.