Fitch cuts Slovak utility SE to BBB-, outlook negative

By bne IntelliNews July 17, 2013

Fitch Ratings has lowered the long-term Issuer Default Rating (IDR) and senior unsecured rating of Slovakia's dominant power producer Slovenske Elektrarne (SE), 66%-owned by Italy’s energy group Enel, to BBB- from BBB and assigned it a negative outlook.

The global ratings agency said that the downgrade reflects the expected increased capital expenditure and delayed time schedule of the two new units at the Mochovce nuclear power plant as well as weakening electricity market fundamentals in central Europe, which are likely to affect SE's operating cash flow in the coming years.

The construction of the two blocks, designed to have an installed capacity of 880MW, was officially launched on November 3, 2008. Under Enel’s initial plan, the third unit should have been launched at the end of 2012 and the fourth in mid-2013. However, the completion of the two units was delayed by more than two years due to hold-ups associated with stress tests, needed to meet new safety standards after the March 2011 Fukushima disaster in Japan. The reactors are now expected start operating in 2015.

Meanwhile, construction costs have swelled by some EUR 800mn to EUR 3.8bn and Enel is now negotiating with the Slovak government the financing of the extra costs. The Slovak government owns the remaining 34% of SE.

According to Fitch, SE will need up to EUR 1.8bn of external funding during 2013 and 2014 to complete its capex plan and refinance debt maturing in 2014.

Fitch noted that central European power producers suffer from sluggish electricity demand and structural changes in supply, which have led to a decline in wholesale power prices across the region. The agency expects wholesale power prices to remain weak in the next few years, affecting SE’s margins.

SE, the biggest electricity producer in Slovakia and the second biggest in the region of Central and Eastern Europe, operates an installed capacity of 5,737MW at two nuclear power plants, two thermal power plants and 34 hydropower plants. According to Fitch, the composition of SE's generation fleet (43% hydro, 34% nuclear and 23% thermal), the increased operating efficiency of existing power plants, and headcount optimization suggest that the company will remain a low-cost power producer and, after the completion of the new units at Mochovce, also a net exporter of electricity.

Related Articles

Poland eyeing second LNG terminal

Gaz-System has selected a contractor to carry out a feasibility study on the construction of a second Polish LNG terminal, the state-owned gas grid operator said on March 27. Poland has recently ... more

Latvia heads off Russian gas mischief with legislation on strategic companies

The Latvian parliament passed amendments to national security and commercial laws on March 23, handing the state the power to block the sale of companies considered strategic. The legislation will ... more

Enea buys French utility out of Poland

Enea has acquired a 100% stake in Engie Energia Polska - the Polish business of French power company Engie - for PLN1.26bn (€290mn), the state controlled Polish utility said on March 14. The ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss