S&P Global Ratings confirmed the long- and short-term issuer credit ratings on 2i Rete Gassecond Italian operator in the gas distribution sector, a “BBB/A-2” with stable outlookas there is an expectation that the company will continue to refinance its large maturities in a timely manner, as they come due.
While Italgas announced anon-binding offer to acquire 100% of the share capital of the peer 2i Rete Gas, which is undergoing a period of exclusivity, it is not yet clear when and if the acquisition will take place. Therefore, the base case still assumes that 2i Rete Gas continues to operate as an independent company.
S&P will monitor the progress of the potential acquisition of 2iRete Gas by Italgas, Italy’s largest gas distribution operator. The rating agency believes now 2i Rete Gas is less likely to undertake an IPO by the end of the year. Earlier this year, shareholders announced that they were starting a preparatory process to list part of the share capital on the Milan Stock Exchange. While shareholders have yet to officially cancel the process, this scenario is now less likely to materialize given the ongoing exclusive negotiations with Italgas.
The updated base case indicates lower adjusted EBITDA than previously expected. Although the 2023 results were better than expected, this was mainly due to the fact that the regulator decided to recognize more than €38 million in the tariff, resulting in a positive impact on the income statement. This amount mainly refers to the replacement of measuring devices before their complete amortization, as well as other regulatory adjustments. Adjusted EBITDA for 2024-2026 is now estimated to be lower than previously expected; in particular, theAdjusted EBITDA for 2025 it is expected to be around 540 million euros, instead of around 600 million euros.
Over the 2024-2026 period, S&P expects the generation of operating cash flows cumulative will be 1.2 billion euros and that the total gross capital expenditure (capex) will be around 1 billion euros, lower than previously assumed. This will compensate for the lower EBITDA. Most of the capital expenditures relate to network upgrades. Given the average annual dividend of 120 million euros, 2i Rete Gas is expected to record slightly negative discretionary cash flows over the period. Therefore, the debt will increase slightly to 3.4 billion euros in 2026 from 3.3 billion euros at the end of 2024, implying that the Debt-adjusted FFO will be between 11% and 12% over the period.
