Standard & Poor's Upgraded the Stand-Alone Credit Profile of HEP

Standard & Poor's Upgraded the Stand-Alone Credit Profile of HEP

Standard & Poor's (S&P) Credit Rating Agency upgraded the stand-alone credit profile of Hrvatska elektroprivreda (HEP) from b+ to bb, as well as its overall corporate credit rating from BB- to BB, by which the latter reached Croatia's sovereign credit rating level. Standard & Poor's stated that at this moment HEP's credit rating could not exceed the sovereign rating.

In the Standard & Poor's report published today, the agency stated that the upgrade was largely the result of HEP's much stronger liquidity as well as its very strong credit parameters which led to a liquidity upgrade from 'less than adequate' to 'adequate'. HEP's financial policy has also improved by one notch. The rating upgrade was positively affected by not only liquidity but also by HEP's improved outlook for working capital management, which led to a one-notch upgrade of the industry risk outlook.

In its report, S&P pointed out that, in accordance with the current rating analysis, if Croatia's sovereign credit rating changes from negative to stable, HEP's outlook will also upgrade to stable. Please note that the credit rating assessment awarded to HEP by Moody's is also equal to the sovereign credit rating of the Republic of Croatia (Ba2 negative).

'We are extremely satisfied with a positive assessment and HEP's credit rating upgrade awarded by Standard & Poor's. This positive rating is a direct result of active corporate management of HEP Group's financial position and its overall business operations. We are pleased to see HEP recognized as a stable company with a strategic investment plan as well as growth and business expansion possibilities in these very challenging times for the energy sector throughout Europe.', said Tomislav Rosandić, a member of the Management Board of Hrvatska elektroprivreda d.d.
Standard & Poor's assessed HEP's conduct of regulated electricity transmission and distribution as positive as well as its ownership of significant hydro and nuclear electricity sources. The Agency also mentioned that HEP had a dominant retail market share and that it did not expect a large amount of switching to its competitors. The company has the advantage of supplying legacy universal customers, which represent a major share of the retail market, as well as guaranteed customers.

S&P pointed out the 'high' likelihood of timely and sufficient extraordinary government support to HEP under stress conditions. Although dividends from HEP are an important source of government revenue, the government has provided support to HEP in the past by not requesting a dividend payout in times of aggravated operations thus providing the company with a sufficient liquidity support.