Credit Rating Outlook of Latvenergo Group Goes Down
OREANDA-NEWS. On 12 January 2009 was announced, that after the international credit rating agency "Moody's Investors Service" ("Moody's") downgraded the rating for Latvian State foreign and local currency bonds from A3 to Baa1, stating the rapid decline of Latvian economy as the reason for such a decision, the credit rating outlook of Latvenergo Group also goes down.
Moody’s has already pointed out previously that the State credit rating downgrade would call forth a corresponding downgrade in the energy company’s credit rating. Moody’s substantiates the negative future outlook for the Latvian State rating with the risk related to the government’s economic programme.
Latvenergo AS is the only Latvian enterprise outside the bank sector receiving an investment grade rating from the reputable Moody's Investors Service.
Within recent years, Latvenergo Group has been investing substantial sums into the modernisation of its power system. Considerable part of these investments consists of loan funds, resulting in a gradual increase of the company’s loan portfolio up to 486 million lats by the end of 2008.
The international credit rating agency Moody’s Investors Service assigned the long-term credit rating ‘Baa1’ to Latvenergo AS for the first time in March 2004. Furthermore, in June 2005, Moody’s raised the investment grade rating of Latvenergo AS to A2 ‘stable’. In November 2008, the rating was downgraded to the ‘negative’ future outlook A3. The credit rating of Latvenergo is equal to that of the State of Latvia
At present, Moody’s cautions Latvia concerning further credit rating downgrade considerations if there are signs of the Latvian economy lapsing into a long-term downfall. If the rating is downgraded for two more grades, dropping from the investment grade to a speculative grade, it will significantly increase the credit interest rates, thus causing substantial additional costs.