ESB could be hit by debt downgrade but CRH would escape
Current market instability could raise the risks to the ESB's refinancing needs if the conditions persisted, a report from a credit ratings agency Fitch has predicted.
ESB has to refinance £850m (€975m) next year and if current markets conditions persist this will create a "marginal'' risk to the ESB's chances of getting cheap funding, said the agency.
Equally if ESB is successful the agency may revise its rating upward to stable, it said.
The biggest risk to the ESB is that the Irish Government gets downgraded to sub-investment grade or 'junk' as this would also cause a follow-on downgrade to ESB.
"Current markets present a marginal increase in execution risk on refinancing for entities with a domestic-Irish focus,'' it said, pointing out that ESB gets 75pc of its earnings from the Republic of Ireland and the rest from Northern Ireland.
"Most of ESB's businesses are regulated, but the generation and supply businesses would suffer if the economy does not recover,'' said the firm.
It pointed out that other Irish headquartered firms like CRH would be more immune to problems with Ireland's credit position. CRH only generates about 2pc of revenues from the Irish market.
"CRH's limited revenue exposure to Ireland means that any downturn in GDP in the Irish Republic in 2011 is unlikely to have a material effect on CRH's credit metrics,'' said Fitch.
Certain companies in Europe will do well regardless of austerity, it added.
"Utilities, operating under the umbrella of regulation or with geographically diversified earnings, are forecast to grow healthily," said the agency.