S&P Affirms Bulgaria’s NEK at BB-, Outlook Negative
Thursday, 01 January 1970
Standard&Poor's Ratings Services (S&P) affirmed its BB- long-term corporate credit rating on Bulgaria-based power utility Natsionalna Elektricheska Kompania EAD (NEK), the agency said.
“At the same time, we removed the rating from CreditWatch, where it was placed with negative implications on Dec. 20, 2012. The outlook on NEK is negative,” the rating agency said in a statement.
“The affirmation reflects our view that NEK's immediate refinancing risk has been eliminated following the refinancing of its 195 million euro syndicated loan, which matured in May 2013. We understand that NEK's parent company, BEH, provided NEK with proceeds from a 250 million euro bridge loan as an intragroup loan to repay the syndicated loan. We understand that BEH plans to refinance the bridge loan with a public bond issue at the BEH level,” it added.
The credit agency also said it assesses NEK's business risk profile as "weak", reflecting the company's meager profitability and regulatory uncertainty owing to annual tariff resets by Bulgaria's State Energy and Water Regulatory Commission. “Our assessment of NEK's business risk profile also factors in the legal unbundling of ESO, NEK's lowest-risk operations, and the uncertainty related to the Belene nuclear power plant project, which we understand is on hold,” it concluded. “The negative outlook reflects our uncertainty as to whether NEK's electricity tariffs for the next regulatory period will cover the ongoing increase in electricity system costs.”