Moody’s changes HEP view to stable

Moody's Investors Service said it affirmed the long-term Ba2 corporate family rating, Ba2-PD probability of default rating and Ba2 senior unsecured ratings of Hrvatska Elektroprivreda d.d. (HEP).

The LGD4 assessment of HEP's senior unsecured notes remains unchanged.

The outlook was changed to stable from negative.

This action follows the outlook change to stable from negative on the Croatian government's Ba2 rating.

Moody’s said the outlook change reflects that the rating is positioned at the same level as Croatia's sovereign rating. The agency does not currently envisage that the rating could be higher than that of the sovereign due to: (a) HEP's strong domestic focus; (b) its 100% ownership by the Croatian government; and (c) the one notch uplift incorporated into its rating to reflect the high likelihood, in Moody's view, of extraordinary support from the government in case of financial distress at the company, in view of its strategic importance to the Croatian economy.

The stabilization of the outlook on the sovereign rating removes the potential downward pressure on HEP's rating, Moody’s added.

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