Moody's upgrades PKN Orlen

Moody's Investors Service said it upgraded to A3 from Baa1 PKN Orlen SA’s €500 million of senior unsecured notes due 2028 and €750 million of backed senior unsecured notes due 2023 issued by Orlen Capital AB (publ) and guaranteed by PKN Orlen. The agency also raised PKN Orlen’s issuer rating to A3 from Baa1.

Concurrently, Moody's boosted to (P)A3 from (P)Baa1 the senior unsecured rating of PKN Orlen's €5 billion euro medium-term note program and revised the outlook to stable from positive.

The rating action follows approval received by PKN Orlen and Polskie Gornictwo Naftowe I Gazownictwo SA's (PGNiG, Baa2 stable) shareholders for the merger of their companies at general meetings held on 28 Sept. 28, 2022 and Oct. 10, 2022, respectively. PGNiG is the dominant company in the Polish natural gas market. Its activities range from oil and gas field development, hydrocarbon production, natural gas imports, storage and distribution grid operations to customer supply. The group is also present in the power and heat generation market,” the agency said in a press release.

The merger is expected to close in the next few weeks.

Additionally, Moody’s said it sees a stronger likelihood of government aid if needed; however, the benefits are offset by a forecast for anemic free cash flow over the next three years reflecting investment plans and that most of its revenues will be generated in the domestic Polish market.

“The stable outlook on PKN Orlen's ratings reflects Moody's expectation that PKN Orlen will maintain a conservative approach to balance sheet management evidenced by PKN Orlen sustaining its Moody's adjusted gross leverage well below 2x even in the context of a normalization of oil and gas prices,” the agency said.

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