ENERGO-PRO a.s.

The stable outlook reflects EPas' strategic focus on its core activities: Hydrogeneration and distribution networks, and supply in the Black Sea region. We base our rating on EPas on the consolidated group credit profile (GCP) of DKHI, which we assess at 'b+'. In our view, the group will maintain its average FFO to debt at above 12% (corresponding to a ratio of about 15% at EPas), and this is commensurate with a 'b+' GCP. The outlook further reflects our view of the group's relatively stable operating performance, stemming from its regulated network business under the developing regulatory environment and its efficient hydro generation assets, particularly from the newly commissioned assets in Turkey. We could revise down the GCP and subsequently

...We expect Energo-Pro's (EPas') 2021 metrics to strengthen from last year's weak levels if hydrology conditions across key operating regions normalize and Georgia's regulation offsets temporary deficit. Energo-Pro's 2020 credit metrics indicate unusually weak performance due to one-off factors. We consider 10% lower electricity output because of an unusually dry year in all key operating countries: -10% in Bulgaria; -9% in Georgia; and -14% in Turkey. We also consider temporary accumulation of regulatory deficit in Georgia due to higher-than-expected purchased power costs. Energo-Pro's 2020 funds from operations (FFO) is 76.4 million, down from 106.4 million in 2019. The group's FFO to debt, as adjusted by S&P Global Ratings, has decreased to 11.4% last year from 16.5% in 2019. In 2021, however, if hydrology recovers closer to the historical average and the regulatory deficit in Georgia is compensated, the company is likely to see an improvement in its FFO to 100 million-110 million in 2021,...

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