statnett sf statnett/finans... · · 2016-04-14nordlink and nsn link are scheduled to complete in...

INFRASTRUCTURE AND PROJECT FINANCE

ISSUER IN-DEPTH13 April 2016

RATINGS

Issuer Rating A2 / P-1

Outlook Stable

KEY METRICS:

2013 2014 2015

FFOInterestCoverage

3.0x 4.6x 6.5x

Net Debt /FixedAssets

67.4% 61.7% 58.2%

FFO / NetDebt

5.5% 10.0% 13.9%

RCF / NetDebt

4.9% 10.0% 12.4%

Source: Moody's Financial Metrics

Contacts

Philip Cope [email protected]

Helen Francis 44-20-7772-5422VP-Sr Credit [email protected]

Neil Griffiths-Lambeth

44-20-7772-5543

Associate [email protected]

Statnett SFDemands of large investment programme manageable

SummaryStatnett plans investments over the next five years of around NOK55 billion (EUR5.9 billion),almost three times its capital expenditure between 2010 and 2014. While the company’s keyfinancial metrics will likely suffer, we do not expect the plan to weigh heavily on its creditquality. We also take into account that Statnett has said that it will take steps to strengthenits balance sheet if necessary.

Statnett committed to preserving credit quality. The company said in November 2015that it was prepared if necessary to take measures such as hybrid debt issuance to defend itscredit rating. Such measures would mitigate against a deterioration in key financial metricsin the event of delays to its two subsea interconnector projects, which we regard as theinvestment programme’s greatest source of credit risk.

Statnett well-equipped to manage project risk. The company has a track record oftimely, on-budget delivery for investment projects. Last year it extended the budgetedschedule for the interconnector projects, which account for 20-30% of the 2016-20investment plan, from four to five years, reducing the likelihood of overrun.

Impact of persistently low real interest rates manageable. The Norwegian WaterResources and Energy Directorate’s (NVE) approach to setting Statnett’s weighted averagecost of capital (WACC) gives the company greater protection against both low inflation andlow interest rates than some sector peers. Statnett receives a nominal return on its assetbase which helps insulate its cash flows from low inflation. In addition, allowed returns are nolonger directly affected by prevailing government bond yields.

Financing challenge surmountable. We estimate that Statnett will require aroundNOK40-45 billion (EUR4.3 billion - EUR4.8 billion) of financing up to the end of 2020, ofwhich approximately 85-90% is new funding. We believe this funding requirement will bemanageable. Statnett benefits from its 100% ownership by the Norwegian government (Aaastable), which in 2013 provided an equity injection to support the company’s investmentplan and agreed to a cut in Statnett’s dividend payout ratio from 50% to 25% for financialyears 2014-16.

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=1014530

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 13 April 2016 Statnett SF: Demands of large investment programme manageable

Statnett committed to preserving credit qualityOn 22 March 2016, we affirmed the A2 and Prime-1 long-term and short-term issuer ratings of Statnett with a stable outlook. Theaffirmation reflected our expectation that Statnett will manage the risks associated with its estimated NOK55 billion investmentprogramme over the 2016-20 period so that it continues to meet minimum ratio guidance for the current rating over the mediumterm. This guidance includes FFO / Net Debt of at least 8% and Net Debt / Fixed Assets not above the low 70s in percentage terms.

Our view takes into account Statnett’s commitment in November 2015 to “take measures, if necessary, to protect its rating, includingadjustment of the investment portfolio and balance sheet, hybrid financing or other financial measures available to it.” We believe thismitigates the risks associated with potential project delays or cost overruns.

Project delays pose the greatest potential threat to Statnett’s credit profile, as under Norway’s regulatory framework the companycannot receive returns on transmission links until they become at least partly operational. The risk is particularly acute for subseainterconnectors, as these cannot be completed in phases, unlike onshore transmission links.

We estimate that if corrective measures were needed to protect Statnett’s credit quality against a delay or cost overruns on its keyNordLink subsea interconnector to Germany, the company could issue up to NOK15 billion in hybrid instruments in 2019 withoutexceeding the equity cap threshold set out in Moody’s methodology for hybrid equity.1

Based on our projections, the resulting NOK7.5 billion equity credit would (1) reduce Net Debt / Fixed Assets by around 10 percentagepoints in 2019, compared with a circa 1.1 percentage point increase if NordLink were delayed by 1-year, or a circa 0.3 percentage pointincrease in the event of a 10% cost overrun with no delay; and (2) increase FFO / Net Debt by around 1.4 percentage points in 2019,broadly counterbalancing the reduction in FFO resulting from the lack of regulatory return that year.

Statnett may also have latitude to manage cash flows by altering the timings of its various projects. The investment plan forms a keypart of wider government objectives, suggesting there may be limited scope for revisions. However, the government’s stance towardsStatnett has hitherto been supportive, as illustrated by the NOK3.25 billion equity injection in 2014, and the agreed reduction in thedividend payout from 50% to 25% for financial years 2014-16 (affecting 2015-17 cash flows). Moreover, the current investment plan issignificantly front-loaded with a material step-down in investment expected from 2020.

Under Statnett’s 2015 Grid Development Plan, published in October 2015, the company will invest NOK40-55 billion in the grid overthe 2016-20 period and NOK10-15 billion in the 2021-25 period. Statnett has since guided that investment will be towards the top ofthis range over the 2016-20 period (see Exhibits 1). NOK55 billion would be almost three times Statnett’s total capital expenditure inthe first half of this decade (NOK18.7 billion), and significantly more than the company’s regulated asset base (RAB) in operation ofNOK29.8 billion, with another NOK 5.7 billion under construction at the end of 2015.



Exhibit 1

Statnett's annual investments to more than double by 2018

Source: Statnett (April 2016)

Exhibit 2

Projects under construction 2015

Source: Statnett (April 2016)

Interconnector projects carry greatest construction riskStatnett’s investment programme includes two new subsea links, the NordLink interconnector to Germany, and the NSN Link to theUK. Statnett’s 50% share of the cost of these projects amounts to NOK14-18 billion, between 20% and 30% of its total plannedinvestment over the 2016-20 period.



NordLink and NSN Link are scheduled to complete in 2019 and 2021 respectively, bringing Statnett’s total subsea HVDCinterconnectors to six (see Exhibit 3).

Exhibit 3

Statnett's existing and planned subsea HVDC interconnectors

Source: Company data; Moody's Investors Service

Under the Norwegian regulatory framework, transmission links cannot earn a return until they are at least partly operational. Sinceoffshore projects cannot be built in stages, and regulated returns are paid from the calendar year in which the cable becomesoperational (reflecting that in Norway the risks and rewards of interconnector trade revenues are for customers not Statnett), weexpect (1) a lag of up to four years before some investment costs associated with NordLink and NSN Link start to be recovered, and (2)a 1.5-2 year lag for the projects as a whole. Delays would prolong the period of no returns, and are the greatest credit risk created byStatnett’s investment programme, in our view.

In contrast, onshore projects of comparable size (e.g. the upgrade of the Western Corridor, budgeted at NOK7.5-8.5 billion), canbecome operational in phases, allowing for a quicker recovery of costs.

Based on Statnett’s 2015 WACC, the company will recover nearly 80% of investment costs within ten years for onshore projectsstarted and completed within the same calendar year. Cost recovery for the planned interconnectors is less than 50% or around 65%after adjusting for the weighted average project spend occurring in year 3 not year 1.

Illustrative recovery of NOK8 billion of investment costs under regulatory framework

Exhibit 4

OnshoreExhibit 5

Interconnector

Asset life = 40 years; WACC = 6.32%; NOK8 billion midpoint of Statnett’s guidance for NordLink and NSN Link; ignores interest.Moody’s assume an S curve interconnector spend profile (10% of total project spend in year 1; 17.5% year 2; 22.5% year 3; 27.5% year 4; and 22.5% year 5). This reflects that majority ofcapex spend is typically backloaded for these type of projects.Source: Moody's Investors Service



NordLink delay would have greater impact than NSN LinkBoth interconnector projects are expected to provide similar contributions to FFO once operational, as Statnett’s share of theinvestment cost is NOK7-9 billion in both cases. However, delays to NordLink would have a greater adverse impact than delays to NSNLink.

This reflects the relative timing of the projects within the investment cycle, and their material contribution to group FFO. NordLinkis scheduled to come online in 2019 towards the end of the peak investment period (around NOK45 billion over the 2016-19 periodunder Statnett’s projections). In contrast, investment is expected to have fallen back to levels on a par with the NOK5-6 billionper annum reported in 2013-15 by the time NSN comes on line in 2021. Subject to successful delivery, earlier projects will supportearnings.

With a NOK8 billion investment cost and assuming the WACC remains at the current 2015 level, we estimate that a return of NOK506million on NordLink constitutes about 11% of the FFO required to meet the minimum ratio guidance of 8% FFO / Net Debt. Thisreturn, and regulatory depreciation in subsequent years, will mitigate the impact on group metrics of delays to NSN Link.

Any cost overruns would exacerbate the negative impact of delays to NordLink (see Exhibit 5). A 10% cost overrun would increase netdebt by NOK800 million, plus associated interest cost. Leverage rises steadily in the construction period due to the capex overspend,and then substantially in construction year 5 due to the regulatory return foregone from the link not becoming operational by theend of that year. There is then a further-step up in leverage in operational year 1 due to the regulatory depreciation foregone from thedelay.

While cash inflows are higher from scheduled operational year 2 onwards, due to the full pass through of cost overruns resulting inhigher regulatory return and regulatory depreciation, this is not sufficient to offset the prior increase in leverage. However, we wouldexpect Statnett to receive compensation for both delays and cost overruns from contractual terms and other protection measures,limiting the negative impact on cash flows.

Exhibit 6

Illustrative comparison of on-budget and on-time with 1-year delay and 10% cost overrun

Ignores interest on incremental debt. Under 1-year delay scenario assume 10% overspend versus schedule in construction years 1-4. The 10% overspend versus schedule for constructionyear 5 is apportioned 75:25% between construction year 5 and operational year 1.Source: Moody's Investors Service

A comparison of overspend and delay is shown below. Until the interconnector is operational, the overspend with no delay scenario hashigher capex cash outflows and thus higher leverage. However, within one year of the interconnector becoming operational, leverageis lower, excluding interest on the incremental debt in the intervening period, compared to the 1-year delay on-budget scenario.This reflects the additional year of regulatory return (in scheduled construction year 5) and regulatory depreciation (in scheduledoperational year 1). During the early years of the operational phase, FFO continues to be higher year due to the higher regulatory returnand the depreciation components of allowed revenue arising from the higher project cost. This further improves the impact on leverageand FFO/Net Debt going forward.



Exhibit 7

Illustrative comparison of 10% overspend and no delay vs on budget but 1-year delay

Ignores interest on incremental debt. Under 1-year delay scenario assume 10% overspend versus schedule in construction years 1-4. The 10% overspend versus schedule for constructionyear 5 is apportioned 75:25% between construction year 5 and operational year 1.Source: Moody's Investors Service

Statnett well-equipped to manage project riskSubsea interconnectors carry higher construction risk, but Statnett has experience of such projects. The company has been prudentin its planning for NordLink and NSN Link and has extended the scheduled construction period by a year, reducing the likelihoodof overruns. Statnett has further reduced execution risk by teaming up with experienced well-established contractors, minimisingcounterparty risk where possible, and by putting in place an extensive insurance programme.

Statnett has a good track record of delivering projects on time and on budget and, with increasing competition in the supplier market,has succeeded in cutting costs for large onshore projects, which constitute the majority of the investment programme. This has earnedthe company a 100% efficiency score from the NVE.

This 100% efficiency score, coupled with the regulator’s approach of using ‘average’ rather than ‘frontier’ efficiency as the baseline,provides scope for Statnett to achieve modest outperformance against cost allowances. We do not expect this situation to change inthe foreseeable future.

While no date has been set for the next benchmark analysis, in the period since the last assessment (2012/13) Statnett has continuedto demonstrate significant cost savings. In October 2015 the company cut the project cost estimate for the Western Corridor by over10% (now NOK7.5-8.5 billion). We therefore do not anticipate material changes to NVE’s conclusions from the last study: (1) thatthere is no evidence of ineffiency in Statnett’s operations and (2) Statnett has a high efficiency compared to other TSOs in the study.

In Norway, network companies are legally entitled to a fair return on investments. This ‘fair return’ is explicitly quantified, and isdesigned to ensure that averagely efficient grid companies have an incentive to invest.

Given the strategic importance of Statnett’s investment programme to delivering wider government objectives, we expect Statnett toearn a reasonable return on invested capital.

Impact of persistently low interest rates manageableWe believe Statnett is well placed to manage the current low real interest rate environment for three reasons:

» The company more protection against low inflation under its regulatory framework than some European peers.

» The Norwegian regulator’s approach to setting WACC insulates the company against the effect of low interest rates.



» Statnett will be raising significant new capital at low rates to finance investments, reducing its embedded debt costs.

Regulatory framework provides reasonable protection against low inflationWith a nominal return on its asset base, Statnett is insulated from the effects of low inflation to a greater extent than sector peers.Network operators in France, Ireland, Italy, Netherlands, Sweden and the UK receive a real return and therefore lose out when inflationis below regulatory assumptions. In these jurisdictions, low inflation reduces network companies’ cash flow generation, weakeninginterest coverage and dynamic leverage ratios such as FFO / Net Debt. Lower growth in the regulated asset base may also result in debtoutpacing growth in the asset base, weakening asset-based leverage metrics such as Net Debt to RAB.

Regulatory approach to setting WACC insulates against the impact of low interest ratesFor most European network operators, allowed returns are driven by government bond yields, as these are used by the regulator as therisk-free rate in the cost of debt and cost of equity components of the WACC calculation. The allowed WACC for network operatorsin highly rated countries such as Norway fell steeply through the financial crisis as surging demand for “safe” government bondsdrove a sharp decline in yields. This reduced operating cash flows significantly at a time when the interest costs on embedded debtwere unaltered. The problem was exacerbated in frameworks where a fixed debt premium was used in the WACC calculation despitewidening credit spreads, resulting in new debt being raised at a cost in excess of the allowance.

Exhibit 8

Comparison of regulated and actual cost of debt for electricity network operators in Norway

* Average cost of debt for non-integrated electricity network operators, i.e. utilities without other activities than network operationSource: NVE

However, the NVE in 2013 adapted its approach to take account of persistently low yields, giving Statnett increased protection againstboth low interest rates and widening credit spreads. The assumed cost of debt reflects prevailing swap and credit spreads whilst therisk-free rate in the cost of equity calculation is fixed at 2.5%, significantly above prevailing Norwegian government bond yields (andthe rate used by UK regulators in their recent determinations). A 1% change in swap and credit spreads moves the WACC by just 0.6%,down from 1.13% for an equivalent change in government bond yields, before the NVE changed its approach.



Exhibit 9

NVE approach since 2013 (New WACC) has kept WACC higher and more stable

Under Previous WACC approach, applied from 2007-12, the WACC was 1.14*risk-free rate + 2.39%Source: NVE; Moody's Investors Service

Exhibit 10

Majority of parameters used in WACC calculation are fixed until at least 2017

* Fixed for at least 5 years, ie until end 2017, as Energilovsforskriften states main principles of WACC calculation fixed for at least 5 years.The inflation rate used in the WACC calculation is a moving average of 4 years inflation: last 2 years historic inflation rate and 2 years forecast (Jan forecast in t+1). The above assumesforecast and actual inflation for 2016-19 of 2%.The risk-free rate is calculated off the average 5-year swap rate in the last calendar year. The estimate is based off a slight rise in the 5-year swap rate through 2016 and 2017 from currentlevels (average January – March 2016 was around 1.1%).The credit spread is the annual average credit spread 5-year bonds issued by power sector (min rating BBB+) based on quotes from the largest two banks. We assume it remains around2015 levels in this illustrative example.Source: NVE; Moody’s Investors Service

Moreover, whereas most network operators are exposed to periodic price reviews, the WACC formula in Norway has no expiry date.Under national legislation (Energilovsforskriften §4-4b) the main principles of the WACC calculation for the revenue cap will be in forceat least until the end 2017. There has to date been no suggestion from the NVE that this will change. We expect Statnett’s WACC tostay above 6% even in the current low interest rate environment.

Financing challenge surmountableWe estimate that Statnett’s investment programme will boost the company’s RAB in operation from NOK29.8 billion at the end of2015 to around NOK70 billion by the end of the decade, assuming NordLink comes online by this time. It will drive substantial funding



needs, with total debt expected to increase from around NOK28.3 billion at 31 December 2015 to around NOK65 billion by the end ofthe decade. Taking into account maturing debt of just under NOK6 billion by end-2020, we estimate total financing requirements ofaround NOK40-45 billion between 2016-20.

Whilst this funding need is sizeable, we believe it is manageable for the group. Regulated networks, particularly in highly ratedregulatory frameworks such as Norway, enjoy good access to the capital markets, supported by the visibility and stability of their cashflows. In addition, Statnett benefits from its 100% ownership by the Norwegian government (Aaa stable) with its track record of upportfor the company’s investment plan.



Moody's Related Research

» National Grid plc and Statnett SF: Interconnector contract awards credit neutral but Statnett more exposed to execution risk, July 2015 (1006645)

» European Electricity Interconnectors: European Interconnector Developers Face Varying Risks, November 2015 (1009953)

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1006645

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1009953



Endnotes1 Under Moody’s March 2015 methodology “Hybrid Equity Credit: For hybrid instruments including shareholder loans,” a hybrid with equity-like features

that make it eligible for basket ‘C’ treatment, i.e. 50% equity and 50% debt, receives a hybrid equity credit. A company’s hybrid equity credit may notexceed 30% of its equity, plus hybrid equity credit.



© 2016 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES ("MIS") ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'SPUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKESECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANYESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKETVALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICALFACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHEDBY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDITRATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDITRATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGSAND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY ANDEVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody's Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCHRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody's Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion asto the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be recklessand inappropriate for retail investors to use MOODY'S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or otherprofessional adviser.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody'sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it feesranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

REPORT NUMBER 1014530

statnett sf statnett/finans... · · 2016-04-14nordlink and nsn link are scheduled to complete in...

Documents