BAKU, Azerbaijan, Dec.23
By Leman Zeynalova - Trend:
Fitch Ratings expects Bulgarian Energy Holding’s (BEH) capex (already high in 2019 at BGN1.1 billion) to remain large also over 2020 and 2021 at BGN1.1 billion and BGN0.8 billion, respectively, Trend reports.
“This will be driven by spending on the Balkan Stream and the IGB projects. We expect it to stabilize at around BGN0.6 billion from 2022,” Fitch Ratings said.
BEH's main investment, under construction since 2019 by fully owned Bulgartransgaz, is the expansion of the gas transmission and transit infrastructure between the Bulgarian-Turkish and the Bulgarian-Serbian borders (Balkan Stream). The project is of strategic importance for Bulgaria by contributing to the diversification of gas-supply routes. Since completion of the project's first stage in 4Q19, Bulgaria has begun importing Russian gas from Turkey instead of the traditional route via Ukraine. The output capacity at the Serbian border (14bcm vs. 19bcm input at the Turkish border) will allow, upon completion in 2021, for gas transit to Serbia and further to Hungary and Austria.
The second large investment is the construction of a gas interconnector between Greece and Bulgaria (IGB). It will have a capacity of 3bcm (extendable to 5bcm) and should become operational in 2021.
EH's funds from operations (FFO) net leverage (2019: 4.7x) has increased due to high capex and new debt-like financing (EUR1.1 billion) from the Arkad-led consortium constructing the Balkan Stream, which we add to Fitch-adjusted debt from 2019. The leverage increase was lower than we originally expected due to strong results at NPP Kozloduy in 2019. FFO net leverage will remain high in 2020 and 2021 (on average 6x) as construction of the Balkan Stream and the IGB proceeds. However, it should then trend towards 4x over 2022-2024 as capex stabilizes and the gas transit starts contributing EBITDA.
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