Research Update: Hungarian Integrated Utility MVM Group 'BBB-' Rating Affirmed; Outlook Stable

MVM Group (MVM), the largest integrated utility in Hungary with 65% of the gas storage market, is highly dependent on Russian gas imports. However, we think its exposure to the Russia-Ukraine conflict, though material, is manageable. We believe that the ongoing elevated gas and power prices will impair MVM's 2022 financial performance. For 2022, we forecast working outflows to increase significantly to about Hungarian forint (HUF) 740 billion, because of gas stocking for winter in 2022, along with a lower EBITDA because of the power transmission system operator's (TSO's) higher balancing costs. As a result, we anticipate that S&P Global Ratings-adjusted funds from operations (FFO) to debt will dip temporarily to about 23%, below the 30% threshold for the 'BBB-'

...- MVM Group (MVM), the largest integrated utility in Hungary with 65% of the gas storage market, is highly dependent on Russian gas imports. However, we think its exposure to the Russia-Ukraine conflict, though material, is manageable. - We believe that the ongoing elevated gas and power prices will impair MVM's 2022 financial performance. For 2022, we forecast working outflows to increase significantly to about Hungarian forint (HUF) 740 billion, because of gas stocking for winter in 2022, along with a lower EBITDA because of the power transmission system operator's (TSO's) higher balancing costs. As a result, we anticipate that S&P Global Ratings-adjusted funds from operations (FFO) to debt will dip temporarily to about 23%, below the 30% threshold for the '###-' rating. - We understand that the Hungarian government is working on a mechanism to compensate MVM for any losses caused by the sale of energy at subsidized tariffs for households through the recently created utility cut protection...

Research Update