On 20 March 2024 Fitch Ratings (Fitch) improved the Outlook of Bulgarian Energy Holding EAD (BEH) from Stable to Positive and affirmed Long-Term Foreign-and Local-Currency Issuer Default Rating at 'BB+'. Fitch has also affirmed the senior unsecured rating of BEH, including for EUR600 million bonds due 2025 and EUR600 million bonds due 2028, at 'BB+'.
The upgrade of the Outlook is driven by the improved business profile of the company, rising profitability supported by progressing liberalization, which enables the company to sell all generated energy at market prices. Fitch also expects low leverage to persist during the forecasting horizon.
The rating affirmation is supported by the ongoing financial support by the sole owner of the company, the Bulgarian state (Bulgaria is rated BBB/Positive). The agency assessed the Bulgarian government's support as 'Strong', as BEH has a crucial role in the security of gas supply, implementing the state-government strategy at diversifying gas supplies to Bulgaria through the execution of major investments such as Expansion of Underground gas storage facility Chiren in Bulgaria and construction of the natural gas Interconnector between Bulgaria and Serbia.
The rating agency points out that the almost completed liberalization of the Bulgarian energy market and its full integration with the energy markets of neighbouring countries should support the profitability of BEH.
From 1 July 2024, the subsidiary NEK will no longer act as a public electricity supplier but will focus its operations on electricity generation from hydro power plants. The agency assesses these developments positively, as free market transactions are more transparent.
For more information please refer to Fitch`s publication: https://www.fitchratings.com/research/corporate-finance/fitch-revises-outlook-on-bulgarian-energy-holding-to-positive-affirms-at-bb-20-03-2024
