The influential ratings agency Moody's has upgraded Bord Gáis based on its "conservative business profile" and "substantial investment programme".

The agency has moved Bord Gáis up from a Baa1 rating to an A3 rating on the back of higher demand for electricity and gas.

The new ratings bulletin said the outlook for the company was stable and the decision to upgrade reflected the State-owned company's "improved financial profile and debt protection measures".

The agency also noted the company's "substantial investment programme over recent years and a corporate strategy focused on maintaining its conservative business profile".

Moody's said the company was of strategic importance to the Republic. In this context, it said the company would benefit from the higher demand for electricity nationally, which in turn should mean the construction of new gas-fired power stations.

"While Bord Gáis remains State-owned, and there are no plans for privatisation, Government support is not directly factored into the rating," said Moody's. But it said the Government had a "credit supportive" stance towards the company.

Specifically, the agency said the decision to upgrade the company was related to Bord Gáis's increasing volumes of gas transmission and distribution which was driven by a growth in domestic consumption.

"The vast majority of its revenues remain regulated by the Commission for Energy Regulation, which provides a stable and predictable revenue stream," it said.

Moody's said the way tariffs were set up allowed Bord Gáis a return of about 5.7 per cent before tax.

"As a natural monopoly in a small market, the company, to some extent, remains exposed to asset concentration and is of relatively small size on a European scale. Nevertheless, we expect its position to remain secure. The risk of physical supply outages [ disruptions] is minimal, although there is a dependence on UK gas via two interconnectors," it said.

Moody's said Bord Gáis would probably lose some market share when full liberalisation took place but this should be offset by growth in its electricity business.

"Overall, given the relatively homogenous price of gas in Ireland due to its reliance on the UK wholesale market and the relatively small number of end customers, we expect competition to be limited to a small number of key players able to leverage a competitive advantage," the agency concluded.