DBRS Morningstar Assigns Credit Rating of BBB, Stable, to Acciona Financiación Filiales S.A.’s EUR 40 Million Euro Medium Term Notes Issuance

DBRS Ratings GmbH (DBRS Morningstar) assigned a credit rating of BBB with a Stable trend to the EUR 40 million Green Bonds (the Bonds) issued by Acciona Financiación Filiales S.A. (Acciona FF or the Company) on 26 September 2023 (ISIN code XS2690028753). The Bonds were issued under the Company’s EUR 3 billion Euro Medium Term Note (EMTN) programme. The Bonds will mature in September 2035 with a fixed annual coupon at 5.288%. The credit rating being assigned is based upon the credit rating on the already-outstanding series of the above-mentioned debt instrument.

The Issuer rating for Acciona, S.A. (Acciona or the Group) and credit rating for Acciona FF’s Euro Medium Term Notes were confirmed at BBB with a Stable trend on 8 August 2023. The credit rating for Acciona FF’s Euro Medium Term Notes is largely based on the credit rating on Acciona, which is the guarantor of the EMTN programme. The current credit ratings reflect DBRS Morningstar’s view that: (1) Acciona retains a 82.632% ownership in Corporación Acciona Energías Renovables S.A. (CAER; rated BBB (high) with a Stable trend by DBRS Morningstar), and is committed not to lower its stake in CAER to below 70%; (2) Acciona continues to benefit from substantial EBITDA and cash flow contributions from CAER post initial public offering; (3) the credit quality of the Group's infrastructure division, particularly construction activities, is weaker than the Group’s regulated and nonregulated generation businesses and limits the Group's credit ratings; (4) Acciona’s credit metrics remain solid and continue to support the BBB credit ratings; (5) Acciona's credit ratings are one notch lower than CAER's credit ratings and reflect structural subordination of Acciona's debt compared with CAER's debt; (6) the ratio of Acciona's modified nonconsolidated debt with respect to its modified nonconsolidated capital structure will decrease to the 20% to 30% level over the forecast horizon, not requiring further negative adjustments; and (7) the liquidity position of the Group is moderately positive, with Acciona having cash and cash equivalents of approximately EUR 3.1 billion as of 30 June 2023, availability under its banking lines (EUR 3.6 billion as of 23 June 2023), and access to the debt and equity capital markets.

Acciona FF’s credit ratings are supported by Acciona’s (1) stable cash flows from regulated generation assets in Spain; (2) long-term contracts for its international generation assets; (3) strong construction, operational, and technical expertise; (4) geographic and business diversification; (5) stable cash flow from service activities in water, concessions, and other services; and (6) substantial infrastructure backlog for growth. Acciona’s credit ratings are constrained by the Company’s (1) capital expenditure intensity and project development risk; (2) exposure of nonregulated generation to price volatility in the long term; (3) exposure of construction activities to potential cost overruns and long lead times; (4) operational risk; (5) currency and interest risk; and (6) intense competition.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Environmental (E) Factors
As Acciona is a pure-play leader in the renewable energy sector through its subsidiary, CAER, the Carbon and GHG Costs Environmental factor has a relevant effect, with a modestly positive impact on DBRS Morningstar’s overlay analysis.

Social (S) Factors
Given Acciona’s pivotal role in developing and managing key infrastructure assets, the Product Governance Social factor is relevant for the analysis, although with no current impact on the Group’s current analysis.

Credit rating actions on Acciona and CAER are likely to have an impact on this credit rating.

There were no Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023) https://www.dbrsmorningstar.com/research/416784.

Notes:
All figures are in euro unless otherwise noted.

DBRS Morningstar applied the following principal methodologies:
-- Global Methodology for Rating Companies in the Construction and Property Development Industry (24 November 2022) - https://www.dbrsmorningstar.com/research/405710.
-- Global Methodology for Rating Companies in the Independent Power Producer Industry (9 May 2023) - https://www.dbrsmorningstar.com/research/413646.
-- Global Methodology for Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (13 September 2022) - https://www.dbrsmorningstar.com/research/402616.

The following methodologies have also been applied:
-- DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (28 March 2023) - https://www.dbrsmorningstar.com/research/411694.
-- DBRS Morningstar Global Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (26 October 2022) - https://www.dbrsmorningstar.com/research/404334.

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223.

The primary sources of information used for this credit rating includes audited financial statements, quarterly results reports, management projections and budgets, and external correspondences. DBRS Morningstar considers the information available to it for the purposes of providing this credit rating to be of satisfactory quality.

DBRS Morningstar does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and credit ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Giuseppe Fresta, Senior Vice President.
Rating Committee Chair: Victor Vallance, Managing Director.
Initial Rating Date: 23 April 2020.
Last Rating Date: 8 August 2023.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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