Main factors affecting the rating

The rating reflects the operating results of the Opolskie Region, its high ability to finance investments from its own resources, the exemplary liquidity position of the budget and a low level of debt service in relation to operational funds. The rating also takes into account the level of indebtedness of voivodship companies. The publication of new macroeconomic data had a positive impact on the entity’s assessment, but it was not strong enough to justify the raising of the rating. The possible change will depend on annual results, which will be published by the entity in the first half of 2019.

The debt policy is implemented in a safe manner and guarantees its timely repayment in subsequent periods. The debt planned by the entity should not significantly affect its ability to settle long-term liabilities.

The current income of the unit in 2013-2018 decreased from PLN 368.45 million in 2013 to PLN 348.76 million in 2018, which implies a cumulative annual growth rate (CAGR) of -1.09%. The voivodship’s tax revenue ranged from 25.30% to 37.23% of current revenue.

The average cost of the voivodship’s debt is 3.70%, while the average debt repayment period – the time period in which the voivodship would pay off its liabilities assuming that it would allocate its entire operating surplus in accordance with the plan for 2018 is 4.32 years. However, if we expand the analysis and take the average surplus from 2013-2018, then the value of this indicator will decrease to only 2 years.

 

The main factors of the rating change

The region has stable budget bases. Despite the decline in 2014-2015, the level of operating sur-plus increased and remained in 2016-2017 at a level comparable to that of 2013. The relatively low surplus in 2018 may be related to prudent forecasting of income and expenses. An important factor that may lead to a change in the rating will, therefore, be an analysis of the actual implementation of the planned revenue and budget expenditure plan. Analysis of voivodship budgets in the last 11 years suggests that approx. 20% of the revenue item generates approx. 85% of the budget (similarly in the expenditure of 20% of the largest items, it generates 70% of all expenditure).

Despite the completion of investment projects in the last 5 years exceeding PLN 794 million, the level of debt is lower than at the beginning of this period by PLN 96.3 million (as at 31/12/2017). The debt planned by the entity in subsequent periods should not significantly affect its ability to settle long-term liabilities.

Factors determining the raising of the rating: maintaining the ratio of direct debt servicing to operational funds below 70%, with the increase in the operating margin (operating surplus / current income ratio) above 12%.

Factors determining the lowering of the rating: an over-plan increase in the level of debt, with the operating margin below 8% and the trend in the relation of income and operating expenses, caused by an increase in expenditure on wages.

 

Contact:

Krzysztof Waśko
Lead Analyst

krzysztof.wasko@incrating.pl
+48 61/851 38 83

Long-term credit rating Opolskie, Region of