S&P Global Ratings has raised its long-term issuer credit rating on Bulgaria’s National Electricity Company (NEK) to ‘BB’ from ‘BB-‘ with a stable outlook due to its improved credit indicators, NEK said on Monday.
The rating upgrade follows the strong financial performance in 2022 of NEK and its parent company, state-owned Bulgarian Energy Holding (BEH), NEK said in a press release.
The stable outlook reflects S&P’s expectation that BEH will continue to provide liquidity support to NEK and its other subsidiaries, maintaining low debt levels during 2023-2025, while improving its revenue profile.
NEK is seen as a strategically important subsidiary of BEH, given its role in Bulgaria’s energy landscape as a zero-emission hydropower producer and public electricity supplier, while also making up nearly 20% of the parent company’s earnings before interest, taxes, depreciation and amortisation (EBITDA).
However, the rating agency expects that due to the delayed electricity market liberalisation until 2025, NEK’s independent credit profile and financial results could be impacted.
The electricity company’s rating could be raised further if BEH’s credit profile improves to ‘bbb-‘ on the back of higher stability of the group’s profitability and clearer execution of national energy transition policies, NEK said.
NEK turned to a preliminary net profit of 117.4 million levs ($65.2 million/60 million euro) in the first three months of 2023 from a net loss of 8.6 million levs in the same period of last year, driven by contributions to the national energy security fund.
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