The Baa2 issuer rating, which applies to AGL and its AGL Hydro Partnership, is based on a stable outlook for the company.
A Baa2 rating from Moody’s is a medium-low investment-grade rating similar to the BBB assessment that Standard & Poor’s confirmed last week after AGL flagged further writedowns of $640 million from its gas business.
At the same time, Moody's has also assigned a (P)Baa2 senior unsecured MTN program and Baa2 senior unsecured debt ratings to around $2.4 billion of bonds and bank facilities issued by AGL.
"The Baa2 issuer rating reflects AGL's strong retail market position and the low cost position, scale and operating track record of its generation fleet, factors which leave the company well positioned to navigate the challenges presented by the evolving energy market in Australia," Moody's vice president and senior analyst Spencer Ng said.
"Industry challenges include downward pressure on margins from intense retail competition and excess generation capacity, rising gas wholesale costs and the negative effect of emerging distributed generation technology on the demand for conventional grid-supplied energy.
"Notwithstanding these industry headwinds, we believe that AGL management's strategic focus on responding to shifting market conditions -- coupled with the group's solid operating track record -- should allow the group to manage these challenges and be at the forefront of changing market conditions.”
Moody’s expects AGL to remain well positioned within the Baa2 rating over the next two to three years.
The agency said that, outside of any major acquisitions, AGL was well placed to manage challenges and moderate downside scenarios, such as the closure of east coast aluminium smelters and a change in its coal supply cost should there be an interruption to supply under a key coal contract with Peabody Energy, given Peabody’s weak financial position.
Moody’s has also modelled the partial capitalisation of AGL's future payment obligations under its power purchase agreements with various windfarms, which have a higher degree of risk.
AGL is due to release its first-half earnings on February 10, with an expected profit of between $650-720 million.
