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Rating action

Scope Ratings GmbH (Scope) has today upgraded the issuer rating of Opus Tigáz Zrt (Opus Tigáz) to BBB/Stable from BBB-/Positive. Scope has also upgraded the senior unsecured debt rating to BBB from BBB-.

The upgrade is based on improved credit metrics as a result of tariff increases, the recovery of grid losses from previous periods and cash-funded bond amortisation.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

The issuer rating consists of standalone credit assessment of BBB+ and a negative one-notch adjustment for peer context.

Business risk profile: BBB+ (unchanged). Opus Tigáz' regional monopoly position as the largest gas distributor in Hungary is strongly supportive of the business risk profile. Its network accounts for 40% of the national grid and distributes 25% of domestic gas consumption.

A constraint on the business risk profile is the lag in the recovery of incurred costs through regulated tariffs under the Hungarian regulatory framework. This is evident in the weak profitability since 2022, burdened by much higher costs associated with gas distribution losses, higher operating costs, and a relatively low weighted-average cost of capital (3.24%).

In 2024, however, the operational performance benefited from the recovery of costs incurred in 2023 and 2022, which resulted in higher tariffs and a lower cost for purchased natural gas to compensate for network losses. As a result, the Scope-adjusted EBITDA margin* increased to 34% from 29% in 2023.

For 2025-2027, Scope expects profitability margins to range between 31% and 39%, driven again by lower costs to cover grid losses. This will likely result in lower expected tariff indexation in 2025 and a deterioration of the EBITDA margin to 31% from 34% in 2024.

At the same time, Scope points out the strong profitability impact from costs paid under the service level agreement to Optesz Opus, a company providing joint services and supporting functions in the issuer’s group. Scope expects that the shared service centre will help reduce costs on an arm's length basis and will not constitute a means to replace the dividend payments to parent Opus Global.

The business risk profile assessment is also constrained by somehow limited transparency over the next regulatory framework starting in October 2025, with the weighted-average cost of capital only announced this September.

Financial risk profile: BBB+ (revised from BBB). Improved leverage has led to a higher assessment of the financial risk profile. Leverage, as measured by debt/EBITDA, dropped to 1.3x in 2024 from 2.4x in 2023, a result of tariff indexation and the recovery of network losses from elevated energy prices in previous years. For 2025-2027, Scope expects leverage to improve further, supported by the normalisation of costs related to the price of contracted gas to cover grid losses, coupled with lower net debt as the HUF 50bn bond is repaid, with cash expected to cover amortisation. Leverage will spike in 2025 to 2.2x on the back of lower EBITDA due to the new regulatory period. This will result in lower tariffs due to subdued gas prices and before tariffs indexation in the following years. Thereafter, Scope expects leverage to return to a low range of 1.6x -1.0x in 2026-2027.

Debt protection continues to support the financial risk profile. Through a 2021 bond issue, Opus Tigáz secured funding at a favourable fixed rate of 2.8%, much lower than the Hungarian base rate of 6.5% as of March 2025. Debt coverage should remain comfortable at well above 10.0x, supported by no new external debt raised combined with significant interest income from cash deposits.

Scope estimates free operating cash flow to be negative in 2025, driven by lower profitability, HUF 11bn working capital outflows related to deferred payments from 2024, and higher capex by 15%. Capex in 2025 will mainly stem from obligatory meter replacement in the grid. As a result, cash flow cover is expected to fall to negative 28% in 2025 then rebound to 18%-32% in 2026-2027, supported largely by scheduled bond repayments and no new material debt.

Liquidity: adequate (unchanged). Scope’s assessment of adequate is based on the manageable debt maturity profile. The bond will amortise gradually (3% in 2023-2026, or HUF 1.5bn p.a.; and 9% in 2027-2030, or HUF 4.5bn p.a.), ending with a 49% (HUF 24.5bn) bullet repayment in 2031. Scope expects cash to cover all short-term maturities.

Scope highlights that Opus Tigaz’ senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 50bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 90 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is five notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: credit-neutral (unchanged). Parent support is neutral for the rating. Opus Tigáz is jointly owned by Opus Global Nyrt (rated BB/Stable by Scope) and Status Energy, a private equity fund. Opus Global Nyrt is a Hungarian investment holding company that also owns companies exposed to various sectors including construction, food processing and tourism. Status Energy was established and is managed by Opus Global Investment Fund Manager (a subsidiary of Opus Global Nyrt).

Scope has not constrained Opus Tigáz' issuer rating at the level of its parent company. This is based on the high operational and financial independence from the parent company and Scope’s view that the parent’s creditworthiness will not negatively affect that of the issuer.

Finally, a weak market position relative to Scope-rated international peers has resulted in a negative one-notch adjustment to the BBB+ standalone credit assessment. This view accounts for the issuer’s full exposure to Hungary (rated BBB/Stable by Scope), whose economy is vulnerable due to high inflation and interest rates.

Currently, no company-specific ESG factors have a material impact on the credit risk assessment.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that i) improved credit metrics will be sustained, with debt/EBITDA staying comfortably below 3.0x; and ii) performance will benefit from lower costs related to grid losses following the normalisation of gas prices and from cash-funded bond amortisation.

The upside scenario for the ratings and Outlook is:

1. A remote scenario due to the company’s entire business exposure to Hungary

The downside scenarios for the ratings and Outlook are (individually):

1. Debt/EBITDA sustained at around or above 3.0x
    
2. A weaker sovereign rating on Hungary (remote scenario)

Debt rating

Scope has upgraded the senior unsecured debt rating to BBB, the same level as the issuer rating. Opus Tigáz is the only issuer of public debt.

Environmental, social and governance (ESG) factors

Opus Tigáz’ network of pipelines is relatively modern, which ensures moderate replacement costs and ultimately lower capex. More than 88% of the pipelines are less than 30 years old and have a typical estimated useful life of 45-50 years.

Scope points out to an increasing trend to replace the primary heat source of gas with renewable sources. This has been in response to geopolitical events, including the energy crisis, and is in line with the general trend of increasing the share of renewable sources in the energy mix. In 2020, Hungary made a net-zero emissions target by 2050 a legal requirement. It is also aiming to make the existing natural gas infrastructure capable of blending up to 5% hydrogen, in line with EU efforts to reduce fossil fuel use. These initiatives will increase challenges for utilities in the context of the energy transition but are not enough to be a credit-negative ESG factor.

All rating actions and rated entities

Opus Tigáz Zrt

Issuer rating: BBB/Stable, upgrade

Senior unsecured debt rating: BBB, upgrade

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; European Utilities Rating Methodology, 17 June 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation       YES
With access to internal documents                                          YES
With access to management                                                    YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Kamila Bernadeta Hoppe, Senior Specialist
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 29 March 2023. The Credit Ratings/Outlook were last updated on 25 March 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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