July 25 (SeeNews) - S&P Global Ratings said it has upgraded to 'BBB' from 'BBB-' long-term issuer credit and issue ratings of Croatian state-owned electricity company Hrvatska Elektroprivreda (HEP) and its senior unsecured debt to reflect a similar action on the government's ratings taken in view of the upcoming euro adoption in January 2023.
“On July 14, 2022, S&P Global Ratings upgraded Croatia to 'BBB+/A-2' from 'BBB-/A-3' after the country's adoption of the euro was confirmed from January 2023, providing better access to capital markets. We believe the government now has an increased capacity to support state-owned multi-utility HEP, if needed,” the global credit rating issuer said in a press release on Friday.
The stable outlook mirrors that on the sovereign and reflects its expectation that the company's credit quality will remain commensurate with the 'bbb-' stand-alone credit profile (SACP), with adjusted funds from operations to debt expected to remain well above 45% over the next two years.
HEP plays a very important role for the Croatian government because its regulated transmission and distribution operations are crucial for the security of the country's energy supply, S&P said. Its low-carbon generation fleet, which represents about 80% of national electricity production, provides a significant competitive advantage considering increasing carbon costs and the EU's low-carbon energy directives.
Earlier this month, the European Parliament approved Croatia’s entry into the eurozone as of the beginning of next year. The Adriatic country of 3.85 million people will be the 20th member of the eurozone.
On July 19, another credit ratng agency, Moody's Investors Service, upgraded to Baa2 from Ba1 senior unsecured debt rating of HEP.
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