Nordic Credit Rating said today that it had assigned a 'AAA' long-term issuer rating to Norway-based wastewater utility Veas Selvkost AS. The outlook is stable. An 'N1' short-term rating and a 'AAA' senior unsecured issue rating were also assigned.
Rating rationale
The long-term issuer rating reflects Veas Selvkost's operations, which are governed by statutory objectives and a well-established regulatory framework. The company is owned by three Norwegian municipalities and operates under the principle of full cost recovery, which limits financial risk and creates a non-cyclical operating environment. The rating is supported by the company's effective monopoly status and its role in delivering essential wastewater services deemed necessary for public health and the environment. We see the owners' integration in the operating model as a core strength. Our view of financial risk is supported by the company's long average debt-to-maturity times and low refinancing risk.
Veas Selvkost benefits from its owners' creditworthiness: the three municipalities are characterised by strong demographic factors such as rapid population growth and below-average levels of elderly dependents. In addition, their budgeting is prudent and their operating margins and financial reserves are in line with those of the wider domestic municipal sector. We align the long-term issuer rating with our 'aaa' average credit assessment of the owners due to the company's essential role in providing critical wastewater treatment services. In our view, the company's remit requires it to support the central government in meeting key social objectives. Accordingly, the government would likely face severe political consequences if timely support were not forthcoming in the event of need.
Stable outlook
The stable outlook reflects our view that Veas Selvkost will continue to operate under a well-established regulatory framework and the principles of full cost recovery and revenue predictability. We expect no near-term changes in ownership or the owners' credit quality. In addition, we view the Norwegian framework for wastewater utilities as stable and expect no regulatory changes that might have a significant negative impact on Veas Selvkost's operating model.
As the rating is at the highest possible level, it cannot be raised.
We could lower the rating to reflect a decline in our average credit assessment of the owners, any changes in ownership, or regulatory changes that might negatively impact the company's operating model.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | AAA |
| Outlook: | Stable |
| Short-term issuer credit rating: | N1 |
| Senior unsecured issue rating: | AAA |
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.