Fitch Ratings has affirmed
The Outlook is Stable.
CKI's IDR reflects its Standalone Credit Profile (SCP) of 'a-', which is at the same level as the rating of its 75.7% parent,
CKI's IDR will remain unchanged even if the SCP deteriorates to 'bbb+', reflecting our assessment of 'Medium' operational and strategic incentives for CKHH to provide support under Parent and Subsidiary Rating Linkage Criteria.
Key Rating Drivers
Regulatory Resets Mostly Complete: The more stringent regulatory resets that came into effect over the past few years, especially in the
However, the impact on CKI's dividend inflow is being staggered over several years given its diversified investment portfolio. We expect the company to continue generating stable cash flow after the regulatory resets. Furthermore, we believe cash flow visibility over the next few years has improved with only
Robust Operating Performance: We expect the cash flow contribution from CKI's investment portfolio to fall slightly in 2022 on recent and upcoming regulatory resets, but remain largely stable over the next two to three years. Fitch-adjusted funds from operations (FFO) rose by 20% in 2021. This was partially due to a low base in 2020 but also the higher operating cash flow from CKI's focus on its regulated utility businesses, providing stable returns on a regulated asset base. We believe the contribution from non-regulated but stable businesses such as ista continued to improve, too.
Steady Financial Profile: CKI's net debt fell to
Stable, Diversified Cash Inflow: CKI's ratings are underpinned by stable and predictable income from a diverse portfolio of regulated utilities and infrastructure investments.
A large portion of its cash inflow comes from its regulated gas and electricity network and water assets:
Structural Subordination Risk: CKI's FFO is derived largely from dividends and interest from shareholder loans. However, CKI invests with partners - typically
Derivation Summary
CKI's IDR is supported by a stable and predictable income stream from a diversified portfolio of investments, mainly regulated utilities but also in infrastructure assets. The IDR also takes into account factors such as structural subordination and strong financial flexibility. These are underpinned by a strong management team with a record of financial discipline and execution, and a demonstrated resilient performance amid the pandemic and regulatory resets.
The company has few peers in terms of its business model.
CKI's IDR is also somewhat comparable with the profiles of 'BBB+' rated regulated utilities in the
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Cash inflow from associates, joint ventures and investments declining by 4% in 2022, before remaining stable in 2023;
Dividend payout consistent with historical levels;
Additional acquisitions of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
We do not expect positive rating action in the short to medium term, unless there is significant improvement in cash flow quality or an upgrade in the ratings of its parent, CKHH.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Multi notch downgrade of CKHH's rating;
EBITDA/gross interest and Fitch-adjusted FFO interest cover below 4.5x for a sustained period;
Net debt/EBITDA and FFO net leverage above 6.0x for a sustained period;
Weaker quality cash-inflow from investments due to significant acquisitions in the non-regulated sector that undermine cash flow quality to CKI.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: CKI had cash and cash equivalents of
Issuer Profile
CKI is a global infrastructure company with diversified investments in energy, transportation and water infrastructure, waste management, energy-from-waste and infrastructure-related businesses. It operates mainly in the
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
A-
Affirmed
A-
senior unsecured
LT
A-
Affirmed
A-
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