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Rating action

Scope Ratings GmbH (Scope) has affirmed the A+/Stable issuer rating on Austria’s multi-utility EVN AG. Concurrently, Scope has affirmed the S-1+ short-term debt rating as well as the A+ rating on senior unsecured debt.

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

Key rating drivers

EVN’s A+ issuer rating reflects a standalone credit assessment of A and a one-notch uplift reflecting the company’s status as a government-related entity.

Business risk profile: A- (unchanged). EVN’s credit profile remains largely supported by its solid and well-diversified business risk profile, which ensures resilient operating cash flow. This is backed by: i) its fully integrated business model; ii) a solid diversification across different markets in central and southeastern Europe; iii) a significant exposure to other low-risk and less cyclical infrastructure segments, such as television/cable networks, drinking water supply and heat generation; iv) the further strengthening of the business profile toward regulated electricity and gas grids and renewable energy, elevating the share of stable EBITDA to more than 80% in the medium term; v) limited legacy risks related to the utility’s generation portfolio as shown by comparatively low specific CO2 emissions of its power generation portfolio (ESG factor: credit positive); and vi) likely improvements in the group’s margin profile through the planned disposal of WTE Wassertechnik GmbH.

However, EVN’s business risk profile remains constrained by: i) its exposure to volatile energy trading and supply; ii) higher market risk for activities in southeastern Europe; and iii) the company’s overall margin profile, albeit improving. Credit risk is particularly demonstrated by the volatile cash flow profile of its energy supply business (direct exposure and indirect exposure via EVN KG), where the company could still face operating losses due to adverse energy procurement and the possibility of negative effects on operating cash flows cannot be ruled out. Nevertheless, Scope acknowledges that EVN’s integrated business model and its exposures to power generation and dividend income from Austria’s largest power generator Verbund can largely offset the potential pressure in EVN’s downstream energy supply business, thereby providing a natural hedge.

Scope emphasises that EVN’s business strength is underpinned by its risk-averse and forward-looking capex strategy, which leverages the company’s very low leverage and robust operating performance. While the increased investment programme will weigh on free operating cash flow and credit metrics in the short term, it is expected to enhance the resilience and stability of EVN’s business profile over time. Capital allocation under the “Strategy 2030” programme remains focused on regulated and quasi-regulated activities, particularly energy grids and renewables, which together account for 75–85% of total capex. As such, Scope projects that the share of stable, regulated EBITDA will settle well above 80% in the medium term and the company’s market position will solidify further by expanding its footprint in predictable, policy-supported segments of the utility value chain. As a result, Scope views EVN’s business risk profile as increasingly robust and well-positioned to weather future market volatility.

Scope expects EVN’s operating profitability to improve over the next few years, reaching a Scope-adjusted EBITDA margin* of about 30% compared to a range of 20-25% over the past few years. Such enhancement will likely be driven by reduced exposure to low-margin energy supply, a steadily rising share of high-margin grid and generation business, and the planned exit from the margin-dilutive business within Environmental Services. Profitability is further supported by solidifying earnings volatility and a strong return on capital employed, which consistently trends above 15%, underlining the utility’s efficient capital allocation despite its large exposure to regulated grid activities.

Financial risk profile: A+ (unchanged). EVN has historically maintained a prudent financial policy, balancing investments and shareholder returns with operating cash flow, resulting in stable net debt levels and minimal reliance on new external financing. However, the company’s strategic shift toward a more ambitious investment programme marks a turning point, with Scope anticipating moderately negative free operating and discretionary cash flows over the coming years. The updated capex plan includes gross annual investments exceeding EUR 1.0bn (~EUR 900m net), signalling a more growth-oriented strategy compared to previous years when debt issuance was limited.

As a result, the agency projects debt to increase to about EUR 1.6bn by end-BY 2026/27 compared to EUR 1.0bn at end-BY 2023/24, which will partly be offset by the solidification of the EBITDA at a level of more than EUR 900m over the next three years. Consequently, EVN’s record-low leverage, debt/EBITDA, of 0.9x at the end of BY 2023/24 is expected to rise, though Scope forecasts leverage to remain within a robust corridor of 1.3x to 1.7x through BY 2026/27, thereby remaining commensurate with an unchanged rating.

Still, Scope expects manageable interest costs, supported by declining reference rates and a stable average borrowing rate of around 3.5%, with EBITDA interest cover forecast solidly above 15x.

Despite the planned debt increase, Scope believes EVN will remain committed to preserving its strong financial profile by adjusting capex or dividend payouts if leverage trends outside the target range.

Liquidity: adequate (unchanged). EVN’s liquidity profile remains strong with liquidity ratios consistently above 200%. The group has only few debt maturities over the foreseeable future (about EUR 160m from BY 2024/25 to BY 2026/27). Larger debt maturities will likely be refinanced through the issuance of a new debt instrument with a similar notional, while the company will likely raise new debt for the funding gap of capex that cannot be covered by operating cash flow and cash. EVN benefits from a wide access to different debt funding sources such as bank loans, different credit lines, public bonds and promissory note loans (Schuldscheindarlehen) and keeps a strategic liquidity reserve through its shareholding in Austria’s Verbund.

Supplementary rating drivers: +1 notch (unchanged). The issuer rating incorporates a one-notch uplift on the standalone credit assessment of A, leading to a final issuer rating of A+. This follows the framework set out in Scope’s rating methodology on government-related entities with a bottom-up rating approach, reflecting the public sponsor’s capacity and willingness to provide support. The federal state of Lower Austria, whose credit quality Scope deems to be higher than that of EVN, holds a 51% controlling stake in EVN through its investment vehicle, NÖ Landes-Beteiligungsholding GmbH which needs to be kept as stipulated by law. Scope deems EVN as essential to the federal state, particularly its gas and electricity distribution infrastructure. The upnotching on EVN’s standalone credit assessment is limited to one notch considering: i) that a large part of EVN’s activities are not deemed essential public services; ii) that EVN’s large business outreach to southeastern European markets would make it likely that non-core assets in such markets would be disposed of before the company requests funding from its controlling shareholder; and iii) the lack of full ownership by the public sponsor.

Scope views EVN’s financial policy as generally risk-averse, underpinned by historically consistently positive free operating cash flow, a conservative dividend policy, and close attention to maintaining leverage within rating agency thresholds. Although the updated investment programme entails higher external funding needs and a phase of negative discretionary cash flow, it is not expected to compromise the company’s financial risk profile. Overall, EVN’s financial policy is assessed as credit-neutral, reflecting a slight shift away from past conservatism without materially weakening credit quality.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation of an unchanged robust financial risk profile, as demonstrated by sustained leverage (debt/EBITDA) of up to 1.7x over the next few years. This assumes that, contrary to the last few years, EVN will use its strong balance sheet and raise additional debt for the financing of capex and dividends along its more ambitious capex phase. The Outlook also reflects the agency’s view that EVN’s ownership structure will remain unchanged, as the government of Lower Austria is legally required to retain a majority stake.

The upside scenario for the ratings and Outlook is:

• Debt/EBITDA around 1.0x (deemed to be remote in the context of the company’s investment plan)

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

• Debt/EBITDA above 1.75x on a sustained basis
   
• Prolonged period of negative free operating cash flow
   
• Change in shareholder structure with Lower Austria no longer holding its majority share (remote)

Debt ratings

All public debt is raised at the group level. Scope notes that EVN does not have a commercial paper programme at present and that it uses bank overdrafts for short-term funding purposes instead.

Scope has affirmed EVN AG’s senior unsecured debt rating at A+, the same level as the issuer rating.

Scope has also affirmed the S-1+ short-term debt rating which is based on the underlying A+/Stable issuer rating and very strong liquidity. Scope expects internally and externally available liquidity to cover upcoming debt maturities by more than 200%. Moreover, Scope acknowledges that the company has a strong track record of accessing external funding from banks and investors through private placements and capital market debt.

Environmental, social and governance (ESG) factors

EVN’s ESG profile is assessed as credit-supportive, driven by its consistent and strategic decarbonisation efforts. The company’s exit from coal-fired power generation and ongoing investment activities in renewable energy has significantly reduced its exposure to transition risks. With approximately 925 MW of renewable generation capacity at the end of BY 2023/24 and further expansion focused on onshore wind and solar, EVN is positioned to generate over 80% of its electricity from clean technologies on a sustained basis. This shift has resulted in a below-average carbon footprint, reinforcing its resilience against evolving environmental regulation. The majority of upcoming investments are earmarked for renewable energy and grid infrastructure in Lower Austria, supporting Austria’s broader energy transition and enhancing EVN’s market position and cash flow stability. Though the capex burden will weigh on free operating cash flow, EVN’s strong balance sheet and prudent, creditor-oriented financial policy provide sufficient flexibility.

All rating actions and rated entities

EVN AG

Issuer rating: A+/Stable, affirmation

Short-term debt rating: S-1+, affirmation

Senior unsecured debt rating: A+, affirmation

*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; Government Related Entities Rating Methodology, 10 December 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 Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
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: Sebastian Zank, Managing Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 2 November 2021. The Credit Ratings/Outlook were last updated on 14 May 2024.

Potential conflicts
See www.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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