Moody's ups rating outlook for Portsmouth Water to stable

Moody's Investors Service has affirmed its moderate credit risk rating (Baa1) for Portsmouth Water’s long-term debt. The adjustment followed an announcement by the company that it was seeking creditor consent for an update of its financing structure. Moody’s also changed its outlook for Portsmouth to stable from negative.

Moody’s reported its rationale for its change in outlook as reflecting:

• “significant progress in securing planning permission and in reaching the latter stages of the main works procurement associated with the Havant Thicket Winter Storage Reservoir;

• secured funding in place for all approved investments during the course of the current regulatory period to March2025; and

• a proposed update to the existing financing documentation, which does not materially alter creditor protections.”

Moody's said it expected Portsmouth Water to continue to meet the minimum guidance for a Baa1 rating with gearing not exceeding 80% and an average adjusted interest coverage ratio at or above 1.5x on average over the five-year regulatory period.

Moody’s said factors behind its affirmation of Portsmouth’s its Corporate Family Rating at Baa1 included:

• the company’s “solid and cost-efficient performance;

• Its modest financial leverage compared with historical levels and against peers; and

• creditor protections embedded within its debt documentation.”

Moody’s went on to say Portsmouth’s long-term debt rating was constrained by the company's

relatively small size; a financing structure which allows maintenance

of financial leverage at higher levels than exhibited currently; and a sizeable investment

programme, primarily driven by construction of Havant Thicket