Fitch Rates Bulgarian Energy Holding BB+, Stable Outlook

Fitch Ratings has assigned Bulgarian Energy Holding EAD (BEH), Bulgaria's largest electric and gas utility company, a long-term foreign currency issuer default rating (IDR) of 'BB+' and long-term local currency IDR of 'BB+' with stable outlooks.

The ratings reflect BEH's and its 100%-owned subsidiaries' (BEH group) dominant position in the country's electricity and gas markets, its strong links with the Bulgarian state ('BBB-'/Stable) and evidence of tangible state support.

The ratings also incorporate the weakness of the Bulgarian regulatory framework, corporate governance limitations and the group's large capex plan for 2013-2015 that will likely increase its financial leverage.

Future developments that could lead to positive rating actions include: FFO net adjusted leverage below 1.5x on a sustained basis, for instance due to a lowered capex plan and an improved financial performance, including liquidity management and debt maturity profile; rising and more predictable remuneration for regulated activities; progress in the liberalisation of the electricity market through a rising share of market-based pricing in the generation sector, as well as a stronger corporate governance.

Future developments that could lead to negative rating action include: FFO net adjusted leverage exceeding 3x on a sustained basis, for instance due to financial underperformance or substantial payments related to the ongoing litigation concerning the terminated Belene nuclear project; weakening links between BEH and Bulgaria, for instance, significant reduction of the share of state guaranteed debt and/or lack of additional tangible support if needed; a negative change in Bulgaria's ratings; or a failure to maintain sufficient liquidity.

The full press release can be read HERE.