(The following statement was released by the rating agency)
July 25 - Initial price control proposals from the Office of Gas and Electricity (Ofgem), set out under the regulator’s new RIIO (Revenue = Incentives + Innovation + Outputs) framework, could increase credit risk for National Grid PLC (A-/Stable/A-2) and gas networks in England and Wales, believes Standard & Poor’s Ratings Services. Following a number of enquiries from investors, we have published a Credit FAQ on our findings titled “How Ofgem’s Latest RIIO Proposals Could Increase Credit Risk For National Grid And Gas Networks In England And Wales.”
In this Credit FAQ we address the following questions:
-- How many rated gas and electricity network operators will be subject to the latest RIIO proposals?
-- What are Standard & Poor’s main concerns after examining Ofgem’s initial proposals?
-- What is Standard & Poor’s view on Ofgem’s proposal with regard to allowed returns?
-- Why does Standard & Poor’s consider that significantly reduced expenditure and tough efficiency targets could have a negative effect on the utilities’ credit quality?
-- Does Standard & Poor’s see any factors in the latest RIIO proposals to offset its concerns for the credit quality of National Grid and gas networks in England and Wales?
-- What are Standard & Poor’s next steps in determining the effect of Ofgem’s RIIO regulations on the creditworthiness of National Grid and gas networks in England and Wales?