Ratings agency Moody’s has upgraded senior unsecured debt rating of Croatian state-owned power utility HEP from Ba1 to Baa2 with stable outlook in order to reflect a similar action on the Government’s ratings taken in view of the upcoming euro adoption in January 2023.
At the same time Moody’s has upgraded HEP’s Baseline Credit Assessment (BCA) to baa2 from ba1. The upgrade comes after a review initiated last month.
The statement from the agency said that HEP is the vertically integrated incumbent in the Croatian electricity market and holds a leading position as supplier with around 90 % market share and is the largest producer of electricity in the country, underpinned by a favorable generation mix, with a high share of low-cost and low-carbon hydro and nuclear output, Moody’s noted. Its earnings, measured as EBITDA, incorporate a contribution of around 50 % from lower risk regulated electricity distribution and transmission activities. Moderate capital investments and a flexible dividend policy, aligned to its net profit, support the company’s strong financial profile.
The stable outlook on HEP’s ratings is in line with that of the sovereign as Moody’s would not expect HEP’s ratings to be higher than that of the Government. The stable outlook also reflects Moody’s expectation that the company will continue to maintain a solid business and financial profile commensurate with the current BCA, including leverage, expressed as FFO/net debt, of at least 30 % on a sustained basis.
Last month, the European Commission and the European Central Bank gave positive assessments of Croatia’s progress towards euro adoption as of January next year as its 20th member.
