Nordic Credit Rating said today that it had affirmed its 'AAA' long-term issuer rating on Norway's Agder Fylkeskommune (Agder County). The outlook is stable. The 'N1' short-term issuer rating was also affirmed, as were the 'AAA' issue ratings on the county's senior unsecured bonds.
Rating rationale
The long-term issuer rating reflects Agder's prudent debt management, low debt, and strong liquidity. It also reflects strong operating margins and financial reserves, coupled with a lower proportion of elderly dependants than the domestic local government sector average. We believe Agder will maintain rigorous debt management, despite higher investments, which will most likely be financed by additional debt and readily available funding. We expect costs to remain elevated through the remainder of 2024, constraining operating margins, but believe the county will maintain strong financial management and balanced budgets.
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 are strong thanks to a predictable revenue distribution system and a robust framework that supports strong governance and transparency.
Stable outlook
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 to maintain its relatively low debt levels and control interest expenses, even though it has budgeted for a significant increase in investments this year, while managing liquidity prudently. In addition, we believe Agder has proven capacity to cut costs, if necessary, to ensure a balanced budget. We expect Norway's creditworthiness to remain stable and we expect no material changes to the 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, a significant rise in gross debt and interest payments, 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
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@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.