(The following statement was released by the rating agency)
July 25 -
Summary analysis -- GasTerra B.V. --------------------------------- 18-Jul-2012
CREDIT RATING: AA+/Negative/A-1+ Country: Netherlands
Primary SIC: Gas and other
Credit Rating History:
Local currency Foreign currency
12-Mar-2007 AA+/A-1+ AA+/A-1+
06-Jul-2005 AA/A-1+ AA/A-1+
Rating Rating Date
EURO CP prog auth amt EUR1 bil A-1+ 17-Jun-2008
The ‘AA+’ rating on Dutch gas sales and marketing company GasTerra B.V. (GasTerra) is based on the company’s stand-alone credit profile (SACP), which Standard & Poor’s Ratings Services assesses at ‘aa’, and a one-notch uplift in accordance with our criteria for rating government-related entities (GREs). The one-notch uplift reflects our opinion that there is a “high” likelihood that the State of The Netherlands would provide timely and sufficient extraordinary support to GasTerra in the event of financial distress.
In accordance with our criteria for GREs, our view of a “high” likelihood of extraordinary government support is based on our assessment of GasTerra‘s:
-- “Very important” role for the government. This reflects the company’s implementation of state strategies for the security of gas supplies as the sales and marketing company of gas produced in The Netherlands. It also takes into account implied reputational damage to the state in the event of a payment default by GasTerra. In addition, we factor in noteworthy government income from GasTerra’s shareholding, which in our view provides an incentive for long-term government involvement and support in case of need.
-- “Strong” link with the government. GasTerra is 50% owned by the State of The Netherlands, with the remainder held equally between ExxonMobil Corp .(ExxonMobil; AAA/Stable/A-1+; 25%) and Royal Dutch Shell PLC (Shell; AA/Stable/A-1+; 25%). We do not anticipate that this ownership structure will change over the medium term, in light of The Netherland’s energy policies and the strategic importance of GasTerra to the owners. The strong link also takes into account the state’s significant involvement in determining the company’s strategy, highlighted by the contingent of civil servants on GasTerra’s supervisory board.
The SACP on GasTerra reflects our assessment of the company’s business risk profile as “strong” and its financial risk profile as “minimal”. GasTerra’s “strong” business risk profile reflects its very strong competitive position in the Dutch gas market, thanks to exclusive access to production from the sizable and extremely cost-competitive Groningen gas field. GasTerra’s SACP factors in our view that the company will remain focused on its sales and marketing of Dutch gas, and that the Groningen gas field will continue to produce affluent volumes of gas at a very low cost over the long term. It also reflects our opinion that the contractual financial and gas supply linkage with Maatschap Groningen--which essentially removes any exposure to volume or price risk--will remain unchanged as long as Groningen produces abundant amounts of gas.
These strengths are partly offset by GasTerra’s limited diversity and the gradually depleting nature of its reserve base, notably the Groningen gas field. Furthermore, GasTerra faces an increasingly competitive natural gas market in The Netherlands.
The “minimal” financial risk profile reflects the contractual link and transfer of all financial risks to the Maatschap Groningen gas production joint venture (owned by the same shareholders that own GasTerra), through the price transfer mechanism. This mechanism essentially transfers GasTerra’s revenues to Maatschap Groningen by means of a set purchase price for the gas, notwithstanding production costs, which we understand are very low. In addition, we take into account GasTerra’s relatively low working-capital-related debt at year-end 2011 and an average net cash position throughout the year. GasTerra has no long-term debt outstanding.