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Rating action

Scope Ratings GmbH (Scope) has today upgraded the issuer rating on Hungarian independent power producer MET Hungary Solar Park Kft (MET HSP) to BB- from B+ and revised the Outlook to Stable from Positive. Scope has also upgraded the rating on senior unsecured debt to BB from BB-.

The upgrade is based on stronger credit metrics in 2023 and 2024 following the end of the company’s heavy investment phase, which has resulted in an improved financial risk profile. The Outlook change to Stable from Positive reflects Scope’s expectation that credit metrics will remain at around 2024 levels in the coming years, with continued gradual deleveraging that should benefit from largely positive free operating cash flow.

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

Key rating drivers

Business risk profile: BBB (unchanged). MET HSP’s protected business model continues to support its business risk profile. Its photovoltaic plants in Hungary with 240 MW in total capacity (ESG factor: credit-positive) benefit from the prioritised feed-in of generated electricity at predictable prices for an extended period under the country’s KÁT regime. The recent amendment on the regulated tariff scheme (no indexation of mandatory purchase prices to inflation from 2025 to 2029) is estimated to have only a limited effect on the company’s performance, especially profitability.

Conversely, business diversification remains a credit constraint, given the asset concentration in one country and the full regulatory exposure to Hungary for all operating activities. Nonetheless, as with other companies running a protected business model, such a lack of diversification is not overly credit-negative.

At the same time, profitability is still the strongest driver of MET HSP’s business risk profile. The Scope-adjusted EBITDA margin* was around 80% in 2021 and 2022, even peaking at about 85% in both 2023 and 2024, thanks to the favourable irradiation conditions and higher-than-expected generation volume. Based on unaudited Q1 2025 results and management’s projections, profitability is likely to remain above 80% this year despite revenue lost through the revised tariffs, benefitting from favourable terms contracted by the company on balancing costs. For the next few years, the EBITDA margin will likely remain around such levels, given the rigid tariff scheme and despite the temporary amendment of the inflation adjustment mechanism.

Financial risk profile: BB- (revised from B+). The higher financial risk profile assessment is based on the significant improvement in leverage in 2024 following the conclusion in 2023 of the heavy, debt-funded investment to acquire development rights and finance engineering, procurement and construction works. However, the financial risk profile remains the main constraint on the standalone credit assessment.

Leverage as measured by debt/EBITDA fell to 9.0x in December 2023 from above 30x in 2022 and dropped even lower to 6.6x at YE 2024, benefitting from higher EBITDA from the full ramp-up of new power plants. Reflecting MET HSP’s plan of keeping its power generation fleet steady for the next few years (no new installations and limited maintenance capex), free operating cash flow (FOCF) should remain largely positive in the coming years, as had already occurred in 2023 and 2024, supporting the current financial structure.

Debt protection as measured by EBITDA interest cover recently strengthened to 2.8x in 2024 from 2.4x in 2023 (1.0x in 2022), mainly sustained by the above-mentioned growth of margins. For the coming years, Scope expects that the progressive reduction in interest payments from 2025 will bring interest cover towards 3.0x.

Liquidity: adequate (unchanged). Scope’s view that liquidity will remain adequate over the next few years is based on the expectation that available cash sources (after scheduled maintenance capex) will fully cover upcoming bond amortisation repayments.

Scope highlights that MET HSP’s 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 61,236m) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 30 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is three notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: -1 notch (unchanged). The negative one-notch adjustment reflects governance and structure weaknesses related to the issuer’s interaction within the MET Holding AG group (ESG factor: credit-negative).

While the issuer’s management determines strategy, finances (budget) and operations, credit risks remain in two areas. First, the rated entity also holds management functions at sister companies and the parent company, which could cause a misalignment of interests with creditors and/or the management of group companies. For example, MET HSP may not bill services (in line with its lean management strategy) or it may distribute profits (to the detriment of creditors). Second, while transfer pricing covers all services that the rated entity sources from MET Holding AG, MET HSP has little control over provided services because it outsources almost all its operations.

MET HSP’s ultimate 100% shareholder – Swiss energy trading company MET Holding AG – has higher credit quality. However, parent support is credit-neutral based on the parent’s assumed limited willingness to provide support on a sustained basis.

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

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that credit metrics will remain stable or even improve slightly amid the finalisation of the investment phase, with debt/EBITDA sustained at around or even below 7.0x over the next few years, benefitting from largely positive FOCF.

The upside scenarios for the ratings and Outlook, albeit deemed remote for the time being, are (collectively):

•    Debt/EBITDA of close to 6.0x on a sustained basis;
   
• FOCF/debt increasing towards 10%.

The downside scenario for the ratings and Outlook is:

• Debt/EBITDA of well above 7.5x on a sustained basis.

Debt rating

Scope has upgraded the rating on senior unsecured debt to BB from BB-, which still stands one notch higher than the issuer rating.

Scope has assessed senior unsecured debt to have ‘superior’ recovery, reflecting the high advance rate for property, plant and equipment. The analysis is based on a liquidation value reflecting the good recoverability of major unencumbered assets, which include the company’s five solar parks. Although the ultimate parent could bail out the rated entity in a hypothetical insolvency, liquidation is a more likely scenario, primarily through the sale of various power plants. This is because such assets can easily be sold without significant haircuts to book value, in light of their ESG footprints and remaining regulatory lifetimes, supported by Hungary’s energy market fundamentals. However, Scope has not granted the full two-notch uplift for a ‘superior’ recovery expectation given the lack of operational data on operating assets over an extended period and despite the lower execution risks on the ramp-up of the asset portfolio.

No debt is ranked above senior unsecured debt, which includes the senior unsecured bond placed under the Hungarian National Bank’s scheme. This is likely to remain so until 2031, when the planned bond matures, given the negative pledge.

Environmental, social and governance (ESG) factors

The operation of solar power plants in Hungary – a country which still lags behind others in Europe on the clean energy transition – supports the rated entity’s ESG footprint and robust cash flow. However, the full exposure to one regulatory jurisdiction bears risks from possible framework adjustments (e.g. retroactive tariff cuts), as shown in January 2025 when tariff indexation was amended until 2029.

Lastly, as lined out among the supplementary rating drivers, Scope does not deem MET HSP’s governance as optimal for a risk-averse approach in the interest of creditors.

All rating actions and rated entities

MET Hungary Solar Park Kft

Issuer rating: BB-/Stable, upgrade and Outlook change

Senior unsecured debt rating: BB, 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 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: Marco Romeo, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 19 November 2021. The Credit Ratings/Outlook were last updated on 18 November 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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