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From Bulgaria

01.03.2013 15:10

Fitch Rates Bulgarian Energy Holding BB+, Stable Outlook

The relatively high short-term debt is mostly driven by the upcoming maturity of a EUR195m (BGN382m) loan of BEH's subsidiary (NEK EAD), which is due in May 2013

AUTHOR: publics.bg

© Maritsa East 2 power plant, owned by BEH

Fitch Ratings has assigned Bulgarian Energy Holding EAD (BEH), Bulgaria's largest electric and gas utility company, a Long-term foreign currency Issuer Default Rating (IDR) of 'BB+' and Long-term local currency IDR of 'BB+' with Stable Outlooks.

The ratings reflect BEH's and its 100%-owned subsidiaries' (BEH group) dominant position in the country's electricity and gas markets, its strong links with the Bulgarian state ('BBB-'/Stable) and evidence of tangible state support. The ratings also incorporate the weakness of the Bulgarian regulatory framework, corporate governance limitations and the group's large capex plan for 2013-2015 that will likely increase its financial leverage, an announcement on the Fitch website reads.

BEH has a solid asset base enabling the company to maintain its leading domestic market position. It owns Bulgaria's strategic assets - electricity and gas transmission networks, and two large power plants, a nuclear power plant and a lignite-fired power plant, which are used as the main baseload capacity in the country. BEH group's market share in the country's power generation is 63%.

Until recently, the gas supply business was unprofitable as the gas prices for customers set by the regulator were lower than the price that the company was paying to Gazprom for imported gas. The situation has improved since late 2012, when BEH group has renegotiated its contract with Gazprom and achieved a 20% reduction of the imported gas price.

BEH group intends to substantially increase its capex in 2013-2017. The capex plan for this period totals BGN4.7bn (EUR2.4bn). The annual spending for 2013-2017 averages BGN951m, which is 32% more than the average of BGN718m for 2008-2011. The growth in planned capex primarily stems from much higher investments planned by the holding company. These investments relate to two large projects, the Nabucco pipeline (BGN1bn) and the gas interconnector between Bulgaria and Greece (BGN200m).

At end-September 2012, the group's liquidity was sufficient as it had cash of BGN717m against short-term debt of BGN520m. The relatively high short-term debt is mostly driven by the upcoming maturity of a EUR195m (BGN382m) loan of BEH's subsidiary (NEK EAD), which is due in May 2013. BEH plans to refinance this loan with a corporate bond or a syndicated loan facility at the holding level.