Nordic Credit Rating (NCR) has affirmed its 'AAA' long-term issuer rating on Norway's Agder Fylkeskommune (Agder county). The outlook is stable. At the same time, NCR affirmed its 'N1' short-term issuer rating and 'AAA' issue rating on the county's senior unsecured bonds.
Rating rationale
The affirmation reflects the county's overall stable and strong performance. The long-term issuer rating reflects its prudent debt management, low debt and strong liquidity. It also reflects strong financial reserves and sound operating margins, coupled with a lower proportion of elderly dependants than the domestic local government sector average. We believe Agder will maintain rigorous debt management. We expect costs to remain elevated through 2025, constraining operating margins, but believe the county will maintain strong financial management and balanced budgets.
We have revised our assessment of Agder's budget performance to reflect operating margins in line with that of the wider domestic government sector. We have strengthened our assessment of the county's interest burden to reflect its low interest expense compared with the sector, and we expect Agder to maintain its relative interest level through 2027.
Agder is less diverse than other Norwegian counties in terms of industrial sectors but has a substantial position within the offshore and oil and gas industry. It also receives meaningful revenues from the renewable hydropower sector. Agder occupies a strategic location and plays an integral part in Norway's energy production and self-sufficiency.
Agder benefits from Norway's exceptional creditworthiness, given the country's institutional stability, strong governance and conservative fiscal performance. Local and regional government institutions have a predictable revenue distribution system and a robust framework that supports strong governance and transparency.
Stable
The stable outlook reflects our view that Agder will remain one of the fastest growing regions in Norway with a below-average level of elderly dependants. We expect the county will maintain its relatively low debt levels and control interest expenses while managing liquidity conservatively - even though it has budgeted for continued high investments through 2027. In addition, we believe Agder has the capacity to cut costs, if necessary, to ensure a balanced budget. We expect Norway's creditworthiness will remain stable with no material changes to its institutional framework.
As the long-term issuer rating is at the highest level, it cannot be raised.
We could lower the rating to reflect deteriorating operating margins or high capital spending. We could also lower the rating in the event of a significant rise in gross debt and interest payments, or rising unemployment, or weaker demographics than we currently expect.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | AAA | AAA |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N1 | N1 |
| Senior unsecured issue rating: | AAA | AAA |
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 14 Feb. 2024, NCR's Local & Regional Government Rating Methodology published on 14 Feb. 2024 and NCR's Sovereign Credit Assessment Methodology published on 26 Mar. 2024. For the full regulatory disclaimer please see the rating report.