Rating agency Standard & Poor’s (S&P) has upgraded the credit rating of Croatian state-owned power utility HEP from BB+ to BBB-, so that now it is the same as the Croatia’s sovereign credit rating.
The statement from HEP said that this is the first time since 2009 that the company’s credit rating has been restored to investment grade. CEO Frane Barbaric said that S&P has recognized the continued efforts to improve risk management and overall financial position in the challenging circumstances of the coronavirus pandemic.
According to S&P, the upgrade reflects HEP’s track record of robust credit metrics across different hydro conditions and commodity price cycles. The company’s track record shows the company’s commitment to financial strength and effective risk management, and the rating agency anticipates funds from operations (FFO) to debt will be consistently above 45 % despite increasing electricity, CO2, and gas prices.
S&P expects HEP’s earnings stability and predictability will continuously benefit from 45-50 % of EBITDA coming from purely regulated distribution and transmission activities, providing further support to the group’s credit quality.
The stable outlook mirrors that on Croatia and reflects our belief that HEP will consistently post FFO to debt above 45 % over 2021 and 2022, thanks to prudent risk management and despite inherent exposure to hydrological levels and commodity prices, and that it will successfully refinance its October 2022 550 million dollars maturity before the end of 2021.