The capital of the Bulgarian Energy Holding (BEH) will be increased from the current 2.612 billion levs to 2.948 billion levs, it is clear from the notice published in the Commercial Register. The decision was taken on September 4 and was signed by the caretaker Minister of Economy and Energy Vasil Shtonov. The increase will take place with the resources from the holding’s profit for 2013, which on an individual basis was 396.9 million levs. The consolidated financial result is far more modest – only 29.29 million levs, but it is on its basis that BEH pays dividend to the State from which it remains with fairly big amount of free resources.
But the grand question is what will be used the amount of the capital increase for? The official position of the energy ministry is too vague: „Higher share capital provides positive signals to investors.“
Sources of the Banker weekly said the goal is to accumulate funds so that the National Electricity Company (NEC) does not go bankrupt. The publication of the financial statements of the company in mid-July, made it clear that the loss before tax for 2013 increased by 43 percent. At the end of the 2012 NEC was in the red with 99.432 million levs, and a year later it had a negative financial result of 142.2 million levs. The main reasons for the deterioration of its financial situation there were the long-term contracts to purchase power at inflated prices from renewable energy sources, as well as from the two American plants in Maritsa East.
The idea now is NEC to be restructured and stabilized. Minister Shtonov in several public appearances thickly pointed out that this will only happen at the expense of ordinary consumers, who are destined to bear the brunt of the increase in the price of electricity. It is clear that repayment will have to include the state, but the question is in what form exactly it can take so that it does not violate the European regulations for unregulated care.
The most likely scenario is BEH to provide liquidity support to the power company and now increases its capital because of that. Realistically, such a capital „pumping“ of a company is functional only if it was about to borrow funds on international markets by issuing bonds. Bulgaria’s energy champion has something it can boast of in this respect. In November 2013 it placed a five-year bond issue in the amount of 500 million euros on the Irish Stock Exchange, which was very warmly accepted by buyers. The largest share of the debt securities of BEH fell into the hands of one of the leading global bond funds – Pimco. The financial structure managed by the legend Bill Gross shopped 50 million euros worth of bonds, or 10% of the issue. Other major buyers were Meag Munich Ergo – 30.5 million euros, Deka Investment, Danske Bank, Black River Capital Management, Moore Capital Management, Allianz Bulgaria (Singapore), F & C London, Unica, Spinnaker Capital. The largest is the share of American investors – 156.35 million euros and the British ones: 95.75 million euros. Players from Bulgaria purchased securities worth 18.7 million euros.
In March this year international rating agency Fitch confirmed a long-term credit rating of BEH of BB + with a stable outlook and a first-rate unsecured foreign currency rating BB + on the debt issue itself. The agency’s experts predicted that despite recent positive decisions about regulation of the energy market in Bulgaria, which will probably lead to increased profitability for the group BEH in 2014, we have yet to see a more transparent regulatory framework. Indebtedness of the group was designated as acceptable in comparison with the levels of indebtedness of similar energy companies in Europe.
Furthermore, Fitch estimated liquidity of Bulgaria’s energy champion as adequate after the placing of the five-year bond issue of 500 million euros and evaluated positively its increased diversification of cash and cash equivalents in the local and international banks. According to them, this reduced the concentration risk reported in the past.
Such findings certainly give confidence to the energy holding company if it is thinking of a new bond issue.
Besides NEC energy holding company has other gaps to fill. On 18 August the Commercial Register entered a capital increase of South Stream Bulgaria to 397.6 million levs, and the contribution of the Bulgarian side was 191 million levs. What is also forthcoming are investing activities for the modernization of V and VI units of NPP Kozloduy and some projects for gas interconnectors with neighboring countries, which is the task of Bulgartransgas. Among the priorities is the provision of adequate resources for Bulgargas to fill the gas storage in Chiren in case of crisis associated with disruption of gas supplies from Ukraine in winter.
The BANKER
