S&P rates HEP bond BB-

Standard & Poor’s said it affirmed the BB- long-term corporate credit rating on Hrvatska Elektroprivreda dd (HEP), a 100% state-owned Croatian electricity utility.

The agency also said it affirmed the BB- rating on its senior unsecured debt.

S&P also said it assigning a BB- rating to the proposed bond issuance.

The outlook is negative.

The ratings reflect HEP’s stand-alone credit profile with a high likelihood of extraordinary government support, the agency said.

Despite the company’s improving credit measures, the ratings also consider that credit measures could significantly weaken if HEP decides to go ahead with a potential large investment in a new thermal plant, S&P said.

HEP’s credit metrics have benefitted from favorable hydrological conditions, declining electricity import prices and decreasing procurement costs for natural gas, the agency said.

The ratings are constrained by a forecast for negative discretionary cash flows after 2015, S&P said.

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