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2018/06/06 / Erste Group Research

Credit Report | HEP

Hrvatska Elektroprivreda d.d. (Ba2/BB) is the holding company of Croatia’s leading and fully state-owned (Republic of Croatia: Ba2/BB+/BB+), vertically-integrated utility group. Electricity-related activities are the group’s core business, being responsible for more than 85% of revenues and almost all of EBITDA. Geographically, the group’s focus is on Croatia, where 90% of sales are generated.

In FY 2017, HEP reported consolidated revenues of HRK 13.5bn (+3.7% y/y). Profitability decreased but remained on a high level (EBITDA margin: 33.1%, EBIT margin: 17.1%), compared to peers. Since 2013, HEP has continuously improved its leverage situation. Consequently, credit metrics remained on the level of 2016 (gearing: 9%, debt payoff period: 0.5x) or have further improved (equity ratio: 67%, interest coverage: 20x). Given the good credit metrics, a sound financial profile and the Croatian government’s 100% equity stake, Moody’s affirmed HEP’s rating Ba2 and changed its outlook from negative to stable in March 2017. In November 2017, S&P affirmed HEP’s stand-alone credit rating bb and its all-in rating BB.

The restructuring process focusing on full unbundling according to regulatory requirements, i.e. demerger of the business areas network operation and electricity distribution, was completed in 2017. Further strategic goals include, amongst others, expanding generation capacities, creating new products and services, and entering new regions. In the coming years, investments totaling to HRK 15-20bn are planned.

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General information

AuthorErste Group Research
Product nameCredit News
Topic in focusCredits/ Corporate bonds
Economy in focusCroatia
Currency in focusCroatian Kuna
Sector in focus-


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