Bulgaria's BEH could issue green bonds to fund energy transition

Author: Luka Dimitrov


LONDON (ICIS)--The Bulgarian Energy Holding (BEH) has a potential to issue green bonds thus supporting Bulgaria’s energy transition, several financial analysts and bankers told ICIS.

This comes after rating agency Fitch upgraded BEH’s credit rating from BB- to BB with a positive outlook on 10 May.

Fitch expects “the currently high share of debt at BEH subsidiaries to decrease to around 50% at end of 2021 and to below 20% from 2023 on maturity of the state-provided financing to BEH’s subsidiary, utility NEK,” said an official statement.

Other key drives for the BEH’s rating include Bulgaria’s credit rating upgrade (BBB/Positive) and “further tangible government support to BEH, such as additional state guarantees materially increasing the share of state-guaranteed debt, or cash injections, which would more tightly link BEH’s credit profile with Bulgaria’s stronger credit profile,” added Fitch.

“Bulgaria has a good credit rating from the three major agencies and state-owned utilities could use the country’s rating as a guarantor of issuing future debt including green bonds or sustainability-linked bonds (SLB),” said an investment banker covering central and eastern Europe.

“State energy firms with hydro or renewable capacity could be eligible for such issuance as long as they launch a green bond framework and have renewable projects prepared,” the source added.

Bulgaria has BBB/Baa1/BBB credit ratings from Fitch, Moody’s, and S&P.

Analysts argued that the 1.6GW Maritsa East 2 (ME2) coal-fired plant and utility NEK as BEH entities could be potential green bonds or SLB issuers.

BEH could potentially be a green bond guarantor if ME2 decided to phase out its coal production for energy, switching it to gas. The ME2 plant could also prepare future plan to build solar or wind capacities in the Maritsa basin, stated a second banker.

“NEK runs hydro power plants with 2.7GW capacity and it will be much better suited to issue green bonds and attract investors’ interest. If the company plans a major redevelopment programme for its hydro plants, green bonds could be one of the best funding options for the company,” added a third banker covering the central and eastern European region.

Green bonds could be effective tool for local utilities and could support Bulgaria’s energy transition goals, local sources told ICIS.

The country targets 2.1GW solar, 250MW wind and 250MW biomass capacity by 2030, according to its National Energy and Climate Plan (NECP).

BEH did not reply to ICIS’s request for comment at the time of writing.


Bankers argued the two private coal-fired plants in Bulgaria - 908MW ConturGlobal Maritsa East 3 and 670MW AES Maritsa East 1 could also be potential green bond issuers.

On 16 April, Fitch affirmed AES’s credit rating to BBB-. The company has Ba1 rating from Moody’s. The company targets 6.2GW in 2030 and 15.2GW in 2050 of new global renewable capacity, according to its April investor presentation.

AES Geo Energy, a joint venture between AES and German Geo Power, operates Bulgaria’s largest wind farm - 156MW Saint Nikola.

At the same time ContourGlobal Power has BB/BB- credit ratings from S&P Global and Fitch. Last December the company issued a €710m two-part secured bond offering.

“AES and ContourGlobal could issue green bonds and use the proceeds to fund expansion of their renewable capacity in Bulgaria. These firms can engage green bond investors with a detailed decarbonisation plans and green strategy,” said a London-based banker.

“If private coal-fired power plants (AES and ContourGlobal) decide to use natural gas for energy production and invest in gas turbines, that would be the right direction. There is great potential there. Europe would also help them in this endeavour,” Teodora Georgieva, chief executive and executive director at project company ICGB told ICIS recently.


Bankers said Bulgarian and foreign utilities can use the recent green and SLB bonds issues from Greece as an example.

On 26 April, industrial group MYTILINEOS issued its €500m debut green bond with proceeds to be used exclusively to finance eligible green projects. In early March Greece’s state-owned utility PPC raised €650m in Europe’s first large-scale SLB.

MYTILINEOS has BB credit rating from Fitch while PPC has BB-. BEH’s BB rating is an inch above the rating of PPC, bankers pointed out.

The European Bank for Reconstruction and Development invested €60m in MYTILINEOS’s green bond and €50m in PPC’s SLB.