Nordic Credit Rating has assigned a 'AAA' long-term issuer rating to Norway-based Vestland Fylkeskommune (Vestland). The outlook is stable. An 'N1' short-term issuer rating has also been assigned as well as 'AAA' issue ratings to Vestland's senior unsecured bonds.
Rating rationale
The long-term issuer rating reflects Vestland's above-average income level and sound demographic profile with a low proportion of elderly dependants compared to the domestic local government sector average. These characteristics support strong operating margins and a sound interest burden, despite the county's fair amount of debt. The rating also reflects sound liquidity and balanced financial reserves. We believe Vestland's debt level will grow due to increasing investment needs and continued inflation pressure. On the other hand, we expect continued strong operating margins and that the county will maintain strong financial management and balanced budgets.
Vestland's economy is well diversified across multiple industries including the offshore and oil and gas industries, as well as the more capital- and energy-intensive industries such as aluminium production. It also benefits from tourism and recreation thanks to its varied geography. The county also holds a strategic position as Norway's leading export region and plays an integral part in Norway's energy and other industrial production.
Vestland benefits from Norway's exceptional creditworthiness, given the country's institutional stability, strong governance and conservative fiscal performance. Vestland receives significant ongoing support from the central government. Local and regional government institutions have a predictable revenue distribution system and a robust framework that supports transparency.
Stable outlook
The stable outlook reflects our view that Vestland will maintain its sound demographic profile, and its industrial and export-oriented economy will continue to support strong operating margins. We expect increasing debt over the 2025−2027 forecast period however, reaching a 107% gross debt burden due to the high investments in its complex road and mobility infrastructure. Despite an increasing debt burden, we expect a continued manageable interest burden. In addition, we believe the county will maintain balanced operating budgets. We expect Norway's creditworthiness will remain stable with no material changes to its institutional framework.
The rating is at the highest level and cannot be raised. We could lower the rating to reflect deteriorating operating margins or financial reserves deteriorating below our expectations, gross debt exceeding 110% or higher interest burden than we expect as well as rising unemployment or weakened demographics.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | AAA |
| Outlook: | Stable |
| Short-term issuer credit rating: | N1 |
| Senior unsecured issue rating: | AAA |
Contacts:
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@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.