Fitch Ratings has affirmed the Bulgarian Energy Holding's long-term foreign currency issuer default rating (IDR) and long-term local currency IDR at 'BB+' with a stable outlook.

According to a statement of the Agency, BEH's EUR 500 M bond has been affirmed at foreign currency senior unsecured rating 'BB+'.

According to Fitch Ratings, the ratings reflect the dominant position of BEH and its 100%-owned subsidiaries (BEH group) in the country's electricity and gas markets, and its strong links with the Bulgarian state (BBB-/Stable), mainly evidenced by state guarantees for about 30% of the group's debt and strong operational and strategic ties.

The ratings also incorporate the weakness of the Bulgarian regulatory framework despite some recent improvements in relation to BEH, corporate governance limitations and the group's large capex plan for 2013-2017 that will likely increase its financial leverage.

The key rating drivers are BEH's dominant marketing position, its strong links with the state, and the weakness of the regulatory regime.

According to Fitch Ratings, the share of state-guaranteed debt decreased in 2013 to 30% from about 50% as all new debt raised in 2013, in particular the EUR 500 M bond, was without state guarantees.

The agency reminds that state plans to guarantee a new EUR 80 M loan related to the gas interconnection project between Bulgaria and Greece.

The group's liquidity is sufficient following the EUR 500 M five-year bond issue in November 2013, according to the statement.

At end-2013 BEH group had cash of BGN 510 M versus short term debt of BGN 161 M, according to Fitch Ratings.

According to the agency, BEH has also diversified its cash and cash equivalents with several local and international banks, a development which reduces the concentration risk highlighted by Fitch in the past.

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