Morningstar DBRS Confirms Credit Ratings on Corporación Acciona Energías Renovables S.A. and Acciona Energía Financiación Filiales, S.A.

DBRS Ratings GmbH (Morningstar DBRS) confirmed the Issuer Rating and the Short-Term Issuer Rating on Corporación Acciona Energías Renovables S.A. (Acciona Energía or the Company) at BBB and R-2 (middle), respectively. Morningstar DBRS also confirmed its credit rating on Acciona Energía Financiación Filiales, S.A.'s Euro Medium Term Notes programme at BBB. The trends on all credit ratings remain Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations reflect the Company's solid performance in 2024 and the successful execution of parts of its asset rotation programme which, despite some delay in execution, generated approximately EUR 1,300 million in proceeds with the divestment of 801 megawatts (MW) between November 2024 and February 2025. The Company's slower growth strategy, reflected in lower capex than initially expected and resulting in a slower increase of indebtedness because of less cash consumption, also contributed to the rating confirmations. Credit metrics at the end of 2024 were in line with Morningstar DBRS' base-case scenario, with cash flow-to-net debt at 12.8%, EBITDA-to-interest at 4.7 times (x), and net debt-to-capital at 40.1%.

The Stable trends reflect Acciona Energía's recurrent cash flow generated by its regulated assets and power purchase agreement (PPA)/hedged contracts, limited merchant exposure, the Company's ability to curb its growth plan in the medium term, and its active asset rotation strategy with a commitment to keep its investment grade credit rating.

CREDIT RATING DRIVERS
Although a credit rating upgrade is not likely in the short term, we would consider an upgrade if the cash-flow-to-debt ratio were to improve to well above 22.0%, debt-to-capital to below 38.0%, and EBITDA-to interest remained well above 4.5 times (x) on a sustained basis. However, Morningstar DBRS could take a negative credit rating action as a consequence of (1) significant delays in the Company's asset rotation, which leads to a higher level of debt; (2) considerable project delays and cost overruns associated with Acciona Energía's developments under construction; (3) heightened regulatory risk; or (4) a decline in credit metrics to below Morningstar DBRS' required levels for the current credit rating (e.g., a cash flow-to-net debt level below 15.0% and a net debt-to-capital level above 42.0% on a sustained basis and without the implementation of financial remedies).

EARNINGS OUTLOOK
For the 2025 to 2027 period, Morningstar DBRS expects recurrent EBITDA (excluding capital gains from the asset rotation) to remain quite stable at around EUR 1.0 billion and higher installed capacity and generation output to partially mitigate lower energy prices, mainly in Spain. Although Morningstar DBRS expects some improvement in cash flow generation compared to 2024, the high level of planned capex over the next three years will continue to result in negative free cash flow (FCF), which the Company plans to mainly cover with gains from asset rotation and, to a lesser extent, available cash.

FINANCIAL OUTLOOK
Morningstar DBRS is aware of the Company's dependence on the proper execution of its asset rotation to cover negative FCF, avoiding increasing indebtedness that worsens financial metrics. However, Morningstar DBRS takes some comfort from the Company's successful disposal of 801 MW, completing its 2024 target and covering part of its 2025 goal. Morningstar DBRS estimates gross debt to slightly increase to cover potential delays in the asset rotation strategy, but expects the Group to keep cash flow-to-debt levels above 15.0% and debt-to-capital below 40.0% to remain supportive with the current rating.

Morningstar DBRS also expects the group to continue with its prudent financial policy by (1) managing merchant exposure, keeping it at a low level; (2) limiting its activity in the United States until there is more clarity in the renewable energy industry and lower risk of import tariffs imposed by the Trump administration; and (3) modulating capex to align the growth strategy with the asset divestment plan, protecting financial leverage.

CREDIT RATING RATIONALE
The Issuer Rating is supported by the Company's (1) stable cash flows from regulated generation assets located mainly in Spain; (2) long-term contracts for a moderate percentage of its nonregulated assets; (3) good geographic diversification; (4) the Company's strong commitment to its investment grade credit rating, with active management to mitigate the impact of lower energy prices during the execution of its growth plan; and (5) strong operational expertise and a good track record in the development of power projects.

The Issuer Rating is constrained by the Company's (1) capex intensity and project development risk; (2) exposure of nonregulated generation to price volatility in the long term; (3) operational risk; (4) currency and interest risk; and (5) intense competition in nonregulated operations. The Stable trends incorporate Morningstar DBRS's view that, notwithstanding the expected large capex requirements, Acciona Energía´s credit metrics will remain supportive of a strong BBB Issuer Rating.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of BRA Factors
In the analysis of Acciona Energía, the BRA factors are considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of Acciona Energía, the FRA factors are considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of Acciona Energía, the BRA carries greater weight than the FRA.

On 22 May 2025, Morningstar DBRS amended the above press release to add information regarding the proceeds and the credit rating drivers.

Notes:
All figures are in euros unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Regulated Utility and Independent Power Producer Industries (25 November 2024)
https://dbrs.morningstar.com/research/443429

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (3 February 2025)
https://dbrs.morningstar.com/research/447186 which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024)
https://dbrs.morningstar.com/research/437781

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

A description of how Morningstar DBRS analyses corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The primary sources of information used for these credit ratings include audited financial statements, management forecast, and presentations. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS 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. Morningstar DBRS trends and credit ratings are under regular surveillance.

For further information on Morningstar DBRS 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 Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://dbrs.morningstar.com/research/453797.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Laura Gutierrez, Assistant Vice President
Rating Committee Chair: Anke Rindermann, Managing Director
Initial Rating Date: 26 August 2021
Last Rating Date: 26 July 2024

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

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