NEC with enhanced credit rating from Standard & Poor's

On August 17, 2023, the international rating agency Standard & Poor's raised the credit rating of "National Electric Company" EAD from "BB-" to "BB", with a stable outlook, due to the improvement of the company's credit indicators.

The rating increase is the result of the exceptional performance in 2022 of NEC EAD and the sole owner of the company - "Bulgarian Energy Holding" EAD. The stable outlook reflects the expectations of the rating agency that BEH EAD will continue to provide liquidity support to NEC EAD and the other subsidiaries of the Group, as well as keep its indebtedness low for the period 2023 - 2025. Standard & Poor's also indicate that they expect improvement in the revenue profile of BEH EAD.

Postponing the liberalization of the retail electricity market until 2025 limits NEC EAD's independent credit profile. The rating agency predicts that due to the performance of the function of Public Supplier, NEC EAD may be faced with variable financial results.

The credit agency emphasizes that BEH Group retains its strategic importance for the security of electricity and natural gas supplies in the country and points out that the probability of government support has increased, as evidenced by the state loans and guarantees provided to companies from the holding structure. S&P considers NEC EAD as a subsidiary of strategic importance for BEH Group, given its important role in Bulgaria's energy system as a producer of zero-emission electricity from hydroelectricity, a supplier of last resort and a public electricity supplier, as well as the fact that the company was able to transformed from a loss-making enterprise to a company contributing to nearly 20% of BEH Group's EBITDA (operating profit before interest, taxes and depreciation).

In conclusion, the rating agency reports that it could raise the rating of NEC EAD if the credit profile of BEH Group improves to "bbb-" as a result of greater stability of the group's profitability and more clarity regarding the implementation of national plans and policies aimed at energy transition.