INFRASTRUCTURE AND PROJECT FINANCE

CREDIT OPINION4 November 2019

Update

RATINGS

Bulgarian Energy Holding EADDomicile Bulgaria

Long Term Rating Ba1

Type LT Corporate FamilyRatings

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Mark Remshardt +49.69.70730.808VP-Senior Analystmark.remshardt@moodys.com

Brian Caire +33.1.5330.3417Associate Analystbrian.caire@moodys.com

Andrew Blease +33.1.5330.3372Associate Managing Directorandrew.blease@moodys.com

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Bulgarian Energy Holding EADUpdate to credit analysis

SummaryBulgarian Energy Holding EAD's (BEH) credit profile reflects (1) BEH's improved financialflexibility, supported by reforms of the regulated electricity market; (2) the group'scompetitive position in electricity generation; and (3) its ownership of Bulgaria’s strategicenergy infrastructure.

However, the credit profile is constrained by (1) the group's volatile earnings profile becauseof an unsettled regulatory regime, which limits cash flow visibility; (2) a constantly evolvingelectricity market, mostly as a result of liberalisation; and (3) weak liquidity management,although BEH currently has a strong liquidity position.

BEH's credit profile incorporates our view of (1) its standalone credit quality (BaselineCredit Assessment [BCA] of b1); (2) the likelihood of high support from its 100% owner, theGovernment of Bulgaria (Baa2 positive), in the event of financial distress, given its strategicimportance to the country; and (3) high default dependence between the company and thegovernment. At the same time, the company remains exposed to political interference andregulatory risk.

Exhibit 1

Funds from operations (FFO)/debt meets guidance, but low capital spending may underminefuture earnings capacity

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

600

700

800

900

1,000

2014 2015 2016 2017 2018 2019E

BG

N m

illio

n

EBITDA (LHS) Depreciation (LHS) Capex (LHS) FFO / Debt min guidance (RHS) FFO / Debt (RHS)

Financial data as reported.Sources: Company and Moody's Investors Service

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Credit strengths

» Reforms and price decisions related to the regulated electricity market, which led to improved earnings

» Well positioned to benefit from rising power prices because of competitive power-generation assets

» 100% government ownership and ownership of strategic energy infrastructure, which provide credit uplift

Credit challenges

» Limited earnings visibility as a result of evolving energy markets and short regulatory periods

» Capital spending requirements related to regional gas and electricity market integration to absorb free cash flow

» Currently solid liquidity, but fully reliant on internal cash flow generation

Rating outlookThe stable outlook reflects the fact that BEH's standalone credit profile, expressed in its BCA of b1, has improved in recent years. This isoffset by the sustained volatility in BEH’s operating environment, which partially results from the transition of the Bulgarian electricitymarket to full liberalisation. We expect BEH to maintain funds from operations (FFO)/debt at least in the high teens in percentageterms to maintain the existing BCA. A one-notch downgrade or upgrade of the BCA may not necessarily result in a change in the finalrating.

Factors that could lead to an upgradeCurrently, there is limited upward rating potential in light of the transitioning wholesale electricity market in Bulgaria and theincreasing environmental pressures on BEH’s thermal generation and coal mining assets.

Factors that could lead to a downgradeDownward pressure on the BCA could occur if BEH’s financial profile were to deteriorate persistently below the above guidance as aresult of, but not limited to, (1) the changes in the operating environment, as well as market liberalisation; or (2) negative regulatorychanges, or both. Downward pressure on the final rating may develop if (1) we were to reassess the estimate of high support from theBulgarian government, or (2) the government's rating were to be downgraded.

Key indicators

Exhibit 2

Bulgarian Energy Holding EADThe financial profile has improved, largely supported by beneficial reforms of the regulated market 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 2019E

(CFO Pre-W/C + Interest) / Interest 2.8x 6.8x 5.6x 5.3x 5.1x 7.4x

(CFO Pre-W/C) / Net Debt 7.3% 41.0% 30.1% 31.6% 35.2% 36.0%

RCF / Net Debt 6.5% 41.0% 29.5% 31.6% 33.7% 36.0%

(CFO Pre-W/C) / Debt 6.3% 28.8% 21.6% 20.5% 21.1% 27.1%

RCF / Debt 5.6% 28.8% 21.1% 20.5% 20.2% 27.1%

Debt / Book Capitalization 23.7% 20.6% 27.0% 26.6% 27.6% 26.2%

All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.Source: Moody's Financial Metrics™

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

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ProfileBulgarian Energy Holding EAD (BEH) is the holding company of the incumbent 100% state-owned electricity and gas utility group inBulgaria. Through its subsidiaries, BEH owns over 50% of the electricity generation capacity in Bulgaria and, in 2018, it generated 28.2terawatt-hours (TWh) of electricity, representing around two-thirds of the total domestic generation.

The generation subsidiaries include (1) NPP Kozloduy EAD (NPP, nuclear power plant with installed capacity of 2,000 megawatts[MW]); (2) Nationalna Elektricheska Kompania EAD (NEK) with 2,713 MW of hydro capacity; and (3) TPP Maritsa East 2 EAD (TPP ME2),a 1,620 MW lignite plant with an adjacent mine (Mini Maritsa Iztok EAD or MMI), also owned by BEH. NEK is also the single publicsupplier in the regulated wholesale power market.

Transmission grids in Bulgaria are also owned and operated by BEH subsidiaries, with Electricity System Operator EAD (ESO) being incharge of the high-voltage electricity network and its sister company Bulgartransgaz EAD (BTGaz) managing the gas transmission andtransit networks. Bulgargaz EAD (Bgaz) is the regulated public wholesale gas supplier. In 2018, BEH group reported BGN484 million(about €248 million) of EBITDA.

Exhibit 3

Key contributions to BEH's earnings come from the sale of electricity from low-cost nuclear power generation and regulated transmissionoperations

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018

NEK NPP TPP MMI ESO Bgaz BTGaz

BG

N m

illio

n

Revenues EBITDA

Reported revenue and EBITDA of BEH's subsidiaries before consolidation.Sources: Company and Moody's Investors Service

Detailed credit considerationsRegulated electricity market limits BEH's earnings capacity, but evolving framework prevents new deficits for NEKThe liberalisation process of the electricity market in Bulgaria started in 2004, and its evolution is largely based on a concept advisedby the World Bank to the Bulgarian government in 2016. The bank's proposal prescribes a gradual approach, with a regulated segmentand a competitive segment existing in parallel to protect low-voltage end-customers (households and small businesses) from the pricevolatility of an unsettled free market. In 2018, the regulated market comprised about 38% of the end-user volume. Exhibit 4 shows theset-up of the regulated market in its current form.

3 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 4

BEH group of companies occupy key positions in the regulated electricity market

Entities in red are the fully consolidated subsidiaries of BEH.Sources: Company and Moody's Investors Service

All sale prices from generation to end-supply are annually determined by the regulatory authority, the Energy And Water RegulatoryCommission (EWRC). The required volume is based on the EWRC's demand forecast and is generated from three sources: (1) two long-term power purchase agreements (PPA) with privately owned thermal plants AES-3C and ContourGlobal; (2) small (below 1 MW since1 July 2019, down from 4 MW) renewable installations and highly efficient co-generation plants that are legally entitled to offtake atfeed-in tariffs; and (3) so-called quota producers, which provide the required volume to balance the gap between demand and supplyfrom sources (1) and (2).

The quota producers are all BEH companies, namely NEK, NPP and TPP ME2, to whom the EWRC assigns fixed generation volumes forthe next one-year regulatory period (1 July to 30 June). NEK also fulfills the role of public supplier, which entails a structural deficit forthe company because the weighted-average offtake price paid to the power generators is materially above the selling price charged toend-customer suppliers. The deficit is covered by payments from the Security of the Electricity System Fund (SESF) to NEK. For moredetails, please see our publication Bulgarian Energy Holding EAD: Energy market reform credit positive, but earnings visibility limited,dated 18 June 2018.

While the market framework is credit negative for BEH, recent amendments to the Energy Act by the government and tariff decisionsby the EWRC have mitigated the impact:

» NEK's structural deficit, which is forecast at around BGN730 million in the current period, is covered by monthly payments fromthe SESF, thus securing liquidity. If the actual shortfall is higher than projected, compensation payments will be adjusted in the nextperiod, thus avoiding the accumulation of deficits seen in the past.

» Prices paid to quota generators NEK and NPP remain stable in the current period 2019-20 and were raised by more than 75% forTPP ME2, following a significant loss incurred by the plant in 2018 when the regulated price failed to accommodate the steep rise incarbon costs. TPP ME2's and NEK's hydro plants also had their quota volume reduced.

» The SESF is currently well funded because of high proceeds from the auctioning of carbon certificates, allocated to Bulgaria underthe European Union (EU) emission trading system, which is its main income source. In addition, the fund benefits from the carbonprice-driven rise of power prices because generators and transmission operators (power and gas) are charged a percentage (currently5%) on their revenue. The third key source of revenue is the Obligation to Society fee paid by all electricity consumers. In 2018, theSESF collected around BGN1.4 billion, resulting in a surplus of nearly BGN480 million, which is mostly used to compensate NEK forprior periods' unplanned deficits.

4 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Notwithstanding these improvements, BEH's earnings potential remains constrained by the regulated market, given (1) the lowprobability that the number of protected end-users and thus demand volume will be reduced in the near term; and (2) the continuedexclusion of renewables and co-generation production, which requires offsetting supply from quota (and PPA) producers, thus limitingNPP's and NEK's output volume available for sale in the more profitable liberalised market.

BEH's generation mix will benefit from higher prices in the growing liberalised electricity market and from market coupling,but earnings visibility remains low

Exhibit 5

BEH's power generation is dominated by clean and low-cost nuclear and hydro plantsBEH's net generation by type of plant

14,978 14,528 14,936 14,720 15,291

3,558 4,530 3,063 2,297 3,791

7,777 8,320

7,282 7,960

7,639

0

5,000

10,000

15,000

20,000

25,000

30,000

2014 2015 2016 2017 2018 2019E 2020E

GW

h

Nuclear Hydro Thermal

Source: BEH annual reports

The liberalised market in 2018 comprised around 62% of the total consumption volume and is expected to reach around 65% thisyear, given the migration of renewable and co-generation production between 1 MW and 4 MW to this segment. Electricity trading inthe day-ahead and intra-day markets, and bilateral over-the-counter transactions are handled by the Independent Bulgarian EnergyExchange (IBEX), with BEH being the largest seller and liquidity provider.

Bulgaria is a net electricity exporter, with annual net exports in the range of 6 TWh-10 TWh, depending on demand and hydrology.BEH's high share (70% in 2018) of generation from low-cost nuclear and hydro power plants puts it in a favourable position to servehigher-priced markets such as Turkey, Serbia and Greece because of sufficient interconnection. All Bulgarian power exporters arefurthermore benefitting from the abolition of export-related transmission and access fees since 1 July 2019.

The next step of the integration of the Bulgarian market with regional power markets in Central and Eastern Europe will occur throughparticipation in the 4M market coupling project by the end of this year. The current 4M members are Romania, Hungary, Slovakia andthe Czech Republic. The aim is to facilitate cross-border trading and to provide a gateway to larger EU markets. This is likely to lead toBulgarian prices converging upwards towards the levels of its higher-price trading partners, which would also lift domestic prices.

5 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 6

Bulgarian power prices are generally competitive compared with future 4M market coupling partners, indicating export opportunities

20

30

40

50

60

70

80

90

100

€/MWh

Bulgaria Turkey Greece Romania Hungary Czech Republic Slovakia

Sources: BEH Annual Reports, IBEX, EPEX, LAGIE, EPIAS, OTE, OKTE and HUPX

While we generally expect BEH to benefit from the export opportunities and assumed higher domestic prices, earnings visibilityremains low because (1) IBEX still lacks the depth and liquidity of the more established European markets; (2) the group's nuclearand hydro generation has a fixed cost base and is therefore fully exposed to power price volatility; and (3) there are very limitedopportunities to hedge the company's price exposure (a cooperation between IBEX and the European Energy Exchange on Bulgarianpower forward products only started in June 2019 and long-term PPAs are less common).

Regulated transmission grid operations and gas supply business underpin BEH's earnings, but transparency of theregulatory framework is limitedThe EWRC is the independent regulatory authority for the electricity and gas markets in Bulgaria, which includes BEH's transmissionsystem operators (TSO) ESO and BTGaz, as well as Bgaz as a public gas supplier.

Regulation for the TSOs is largely based on the principle of a rate of return on a regulated asset base (RAB) for electricity and gastransmission. In the case of ESO, the regulatory period lasts one year, 1 July to 30 June. Its current RAB amounts to around BGN1.3billion and is remunerated with returns of 3%, measured by weighted average costs of capital (WACC), which is low compared withthat of its European peers.

BTGaz is subject to a three-year regulatory period with revenue cap elements, with the current period ending on 30 September 2020. AWACC of 8.14% is applied on BTGaz's current RAB of nearly BGN1.5 billion. BTGaz derives its earnings predominantly from a long-termtransit agreement with Gazprom, PJSC (Baa2 stable) and to a lesser degree from the regulated transmission fees for domestic flows.While the terms and conditions of the transit agreement are not known, we deduct from similar arrangements in other markets thatthere is a degree of certainty about the income, for example, through a ship-or-pay clause that guarantees payments independent ofactual transit volume.

While upward adjustments to the WACC rates and a steady increase in BTGaz's RAB over recent regulatory periods have been creditpositive, (1) the reduction in ESO's RAB by approximately 40% in July 2018 to offset the WACC increase; (2) frequent changes in theelectricity TSO fee structure; and (3) the short regulatory periods, illustrate the lack of maturity of the existing framework, which inturn limits the predictability of cash flow.

Bgaz as the public gas supplier is regulated under a cost-plus approach, which ensures moderate EBITDA earnings. Demand in Bulgariain 2018 amounted to 32.2 TWh, of which around two-thirds stem in roughly equal shares from the energy (power and heating)and chemicals sectors. The company imports the required volume under a long-term procurement agreement with Russia, withprices linked to oil. Selling prices are set on a quarterly basis by the EWRC. The company has been facing difficulties in collecting duereceivables from its major customer Toplofikatsia Sofia (TFS), the main provider of district heating in the capital. The impact on Bgaz'searnings is limited because of a receivables purchase agreement with the parent company, BEH, by which the company was able toavoid major write-downs.

6 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Higher earnings should lead to improved leverage, but lack of visibility into capital spending renders forecasts difficultAdjusted EBITDA in 2018 dropped significantly to BGN487 million from BGN809 million in 2017. Key factors included (1) a 10%increase in costs for purchased electricity and gas to BGN3,911 million, only partly offset by a revenue increase; (2) price-drivenelevated accrual charges for carbon allowances that rose to BGN386 million from BGN74 million the year before; and (3) a provisionof BGN151 million in relation to a fine imposed by the EU for the alleged violation of antitrust rules in the gas market (see our IssuerComment Bulgarian Energy Holding EAD - €77.1 million fine imposed by the European Commission is credit negative but decisionreduces uncertainty, dated 21 December 2018, for details). This was partly offset by significantly larger SESF payouts of BGN1,037million compared with BGN474 million in 2017. FFO/debt improved in 2018 to 21.1% from 20.5% the year before because adjusteddebt fell to BGN3,328 million from BGN3,559 million. The decrease partly reflects our changed approach to adjust BEH's debt forpotential nuclear decommissioning liabilities, which decreased to BGN650 million from BGN1 billion, representing the net presentvalue of BEH's liability that is not covered by NPP's contributions to a dedicated decommissioning fund. Our prior approach was mostlybased on peer comparisons. The adjustment effect was partly offset by BEH's refinancing of a maturing €500 million bond with a €600million issue, adding about BGN200 million debt.

We expect BEH's leverage to decrease over the next 12 months as (1) higher electricity prices should improve earnings for NPP andNEK in the liberalised market; (2) elevated carbon costs of TPP ME2 are covered by adequate remuneration in the regulated market;and (3) planned capital investments can be mostly covered by cash flow from operations, though the recently negotiated €110 million(BGN215 million) loan facility provided by the European Investment Bank for the IGB gas pipeline project1 will increase gross debt.While capital investments have remained below depreciation levels in the past several years, thus contributing to good leveragemetrics, we believe that (1) the need to modernise TPP ME2 (see next paragraph); (2) the integration of regional electricity marketswith concurrent transmission grid investments; and (3) the diversification of gas sources and the integration of South Eastern Europeangas markets all demand significant investment spending by BEH, but visibility into details such as volumes and timelines is low. Ourexpectation of improved debt metrics also rests on the assumption of future price and tariff decisions by the EWRC that accommodateexpenses and a moderate return.

Environment: Rise in carbon prices had a significant impact on BEH's earnings from thermal generation in 2018The EU has committed to reduce greenhouse gas emissions by 40% from the 1990 levels. We believe that both regulated andunregulated utilities, which account for around 40% of EU carbon emissions, will need to deliver a significant share of the reductions,and that this will create a variety of risks and opportunities for individual companies.

BEH's generation mix is dominated by clean technologies, with around 70% of power generated by nuclear and hydro. The ligniteplant TPP ME2, which operates under the EU carbon allowance scheme, also has to comply with the norms for other emissions thatare defined in the EU Industrial Emissions directive (2010/75/EU). At this time, the plant does not meet the pollution norms buthas received a temporary permit to continue its operations from the Bulgarian Environmental Agency with a view to achieving theapplicable thresholds by August 2021. BEH's capital spending plans include necessary expenditures.

The economics of TPP ME2 deteriorated significantly in 2018 as a result of the surge in carbon prices. The company recorded expensesfor emission allowances in excess of BGN360 million, around 80% higher than the year before, despite a lower net output of 7.33 TWhcompared with 7.69 TWh in 2017. Inadequate selling prices in both the regulated and the liberalised markets led to an EBITDA loss ofBGN233 million and a record net loss of BGN332 million in 2018, reducing equity in the process. BEH, which has been purchasing theallowances on TPP ME2's behalf, is currently consulting with the government and the European Commission to find a way to restoreTPP ME2's capital in line with state aid rules. TPP ME2 does not owe any financial debt to third parties. In addition, the higher offtakeprice in the regulated market applicable from 1 July this year should mitigate further losses.

7 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 7

Continued losses of TPP ME2 have been eroding the company's equity base

-2500

-2000

-1500

-1000

-500

0

500

1000

-250

-200

-150

-100

-50

0

50

100

2014 2015 2016 2017 2018 2019 H1

BG

N m

illio

n

BG

N m

illio

n

EBITDA (LHS) Equity (RHS)

Source: BEH annual reports

Government support provides three notches of rating upliftBEH is considered a government-related issuer under our methodology, given its 100% ownership by the Bulgarian government. Thecompany is on the government's list of companies that are banned from privatisation. Consequently, the Ba1 rating incorporates (1) thecompany's full ownership by the Bulgarian government; and (2) the high likelihood of extraordinary support from the government incase of financial distress at the company in view of its strategic importance to the national economy (BEH owns a substantial part ofthe domestic energy infrastructure, including gas and electricity transmission grids and the nuclear power plant).

Liquidity analysisBEH has a solid liquidity position. As of the end of June 2019, its available cash and cash equivalents of around BGN1.6 billion andexpected cash flow generation were sufficient to cover the group's needs for the next 12 months. Group liquidity is managed at theparent company level through intercompany loans, the purchase of subsidiaries' trade receivables (namely owed by TFS to Bgaz) andthe centralised purchase of carbon allowances on behalf of TPP ME2 with deferred repayment terms.

BEH's small bilateral bank lines are very small and thus the group is solely reliant on internal cash flow generation, which has beenvolatile in the past, and external debt financing. The lack of a buffer for unforeseen expenses is illustrated by the requirement torefinance the €500 million bond falling due in November 2018, with a larger €600 million bond issuance to raise additional funds forTPP ME2's elevated carbon expenses. There are no major debt maturities over the next 12-18 months; the next large maturity is the€550 million bond due for repayment in August 2021.

Structural considerationsThe rating assigned to BEH is a corporate family rating, which is an opinion of the group's ability to honour its financial obligations as ifit had a single class of debt and a single consolidated legal structure.

BEH’s strategy is to consolidate debt at the holding company level, whose debt liabilities accounted for close to 94% of total groupdebt as of 30 June 2019, but their share decreases when other relevant claims are taken into account. Debt at the subsidiary levelconsists predominantly of amortising capital spending-related loans of NEK and NPP with final repayment dates until June 2022.Holding company debt service is fully reliant on dividend receipts from the operating subsidiaries and this is ensured through a requireddistribution of 50% of net profits after certain allocations to retained earnings and reserves. Higher expenses for carbon allowances(BGN386 million) and for the purchase of TFS receivables (BGN99 million) in 2018 were covered by special dividends from NPP(BGN220 million) and ESO (BGN110 million) in addition to the higher bond volume.

8 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

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Rating methodology and scorecard factorsThe principal methodologies used in rating BEH are our Regulated Electric and Gas Utilities, published in June 2017, and Government-Related Issuers, published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of thesemethodologies.

BEH’s assigned BCA is b1, four notches lower than the Baa3 forward-looking scorecard-indicated outcome. The difference is becauseof (1) the risks and uncertainties with respect to full liberalisation of the wholesale electricity market in Bulgaria; (2) limited earningstransparency, given the influence of regulatory pricing decisions and the lack of details on capital investment spending; and (3) widergovernance issues, such as a lack of approved financial policies and recurring audit qualifications.

Exhibit 8

Rating factorsBulgarian Energy Holding EAD

Regulated Electric and Gas Utilities Industry Grid [1][2]

Factor 1 : Regulatory Framework (25%) Measure Score Measure Score

a) Legislative and Judicial Underpinnings of the Regulatory Framework B B

b) Consistency and Predictability of Regulation B B

Factor 2 : Ability to Recover Costs and Earn Returns (25%)

a) Timeliness of Recovery of Operating and Capital Costs B B

b) Sufficiency of Rates and Returns B B

Factor 3 : Diversification (10%)

a) Market Position B B

b) Generation and Fuel Diversity Baa Baa

Factor 4 : Financial Strength (40%)

a) CFO pre-WC + Interest / Interest (3 Year Avg) 5.3x A 6.5x - 7.5x Aa

b) CFO pre-WC / Debt (3 Year Avg) 21.0% Baa 27% - 32% A - Aa

c) CFO pre-WC – Dividends / Debt (3 Year Avg) 20.6% A 26% - 31% Aa

d) Debt / Capitalization (3 Year Avg) 26.4% Aa 25% - 28% Aa

Rating:

Scorecard-Indicated Outcome Before Notching Adjustment Ba1 Baa3

HoldCo Structural Subordination Notching 0 0

a) Scorecard-Indicated Ouctome Ba1 Baa3

b) Actual BCA Assigned b1

Government-Related Issuer Factor

a) Baseline Credit Assessment b1

b) Government Local Currency Rating Baa2, Positive

c) Default Dependence High

d) Support High

e) Final Rating Outcome Ba1

Current

FY 12/31/2018

Moody's 12-18 Month Forward

View

As of October 2019 [3]

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.[2] As of 12/31/2018.[3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Financial Metrics™

Ratings

Exhibit 9Category Moody's RatingBULGARIAN ENERGY HOLDING EAD

Outlook StableCorporate Family Rating Ba1Senior Unsecured Ba2/LGD4

Source: Moody's Investors Service

9 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Appendix

Exhibit 10

Peer comparison

FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE

Dec-

2016

Dec-

2017

Dec-

2018

Dec-

2016

Dec-

2017

Dec-

2018

Dec-

2016

Dec-

2017

Dec-

2018

Dec-

2016

Dec-

2017

Dec-

2018

Dec-

2016

Dec-

2017

Dec-

2018

Revenue 5,679 5,863 5,786 12,976 13,457 14,238 1,180 1,588 1,472 932 926 878 742 754 875

EBITDA 595 809 487 4,651 3,581 4,044 145 126 120 396 404 241 332 252 286

Total Assets 16,033 16,250 16,004 39,672 39,302 40,948 2,162 2,144 2,140 3,913 4,424 3,806 3,096 3,150 3,576

Net PP&E 12,521 12,271 12,235 31,210 31,484 31,820 1,729 1,688 1,643 3,368 3,317 3,304 2,478 2,482 2,972

Total Debt 3,612 3,559 3,328 6,038 5,151 5,042 912 867 800 802 834 820 971 911 1,140

Cash and cash equivalents 1,023 1,254 1,339 3,130 2,147 3,055 86 75 96 184 234 125 223 299 62

Net Debt 2,588 2,305 1,989 2,908 3,004 1,987 826 792 704 618 601 695 747 612 1,078

(CFO Pre-W/C + Int) / Int Exp 5.6x 5.3x 5.1x 13.5x 13.5x 16.0x 4.1x 4.2x 4.2x 24.1x 30.5x 28.6x 8.7x 7.0x 6.1x

FFO / Net Debt 30.1% 31.6% 35.2% 131.4% 117.3% 194.8% 13.1% 11.6% 12.4% 57.2% 62.6% 37.7% 39.0% 34.5% 17.9%

RCF / Net Debt 29.5% 31.6% 33.7% 110.5% 90.8% 183.8% 13.1% 11.6% 12.4% 44.5% 47.3% 14.9% 38.9% 26.8% 16.5%

FFO / Debt 21.6% 20.5% 21.1% 63.3% 68.4% 76.8% 11.9% 10.6% 10.9% 44.1% 45.0% 32.0% 30.0% 23.2% 17.0%

RCF / Debt 21.1% 20.5% 20.2% 53.2% 53.0% 72.4% 11.9% 10.6% 10.9% 34.3% 34.1% 12.6% 30.0% 18.0% 15.6%

Debt / Book Capitalization 0.3x 0.3x 0.3x 0.2x 0.2x 0.2x 0.5x 0.5x 0.4x 0.2x 0.2x 0.3x 0.4x 0.3x 0.4x

Eesti Energia AS

(EUR'MIL)

Baa3 Stable

Bulgarian Energy

Holding EAD

(BGL'MIL)

Hrvatska

Elektroprivreda d.d.

(KUNA'MIL)

Holding Slovenske

elektrarne d.o.o.

(EUR'MIL)

Latvenergo AS

(EUR'MIL)

Ba1 Stable Ba2 Positive Ba1 Stable Baa2 Stable

All figures & ratios calculated using Moody’s estimates & standard adjustments. FYE = Financial Year-End.Source: Moody’s Financial Metrics™

Exhibit 11

Bulgarian Energy Holding's Moody's-adjusted debt breakdown

(in BGL Thousands)

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

FYE

Dec-18

As Reported Debt 1,677,997.0 1,568,940.0 2,429,190.0 2,319,139.0 2,446,105.0

Pensions 137,688.0 163,762.0 180,886.0 210,265.0 227,964.0

Operating Leases 6,780.0 6,060.0 6,572.0 3,560.0 3,516.0

Non-Standard Adjustments 1,027,208.0 1,026,900.0 995,300.0 1,025,700.0 650,345.8

Moody's-Adjusted Debt 2,849,673.0 2,765,662.0 3,611,948.0 3,558,664.0 3,327,930.8

All figures are calculated using Moody’s estimates and standard adjustments.Source: Moody’s Financial Metrics™

Exhibit 12

Bulgarian Energy Holding's Moody's-adjusted EBITDA breakdown

(in BGL Thousands)

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

FYE

Dec-18

As Reported EBITDA 438,481.0 843,087.0 653,096.0 876,059.0 551,435.0

Pensions 11,197.0 -2,089.0 -928.0 3,002.0 1,410.0

Operating Leases 1,695.0 1,515.0 1,643.0 890.0 879.0

Unusual -5,374.0 -9,175.0 -2,303.0 -2,797.0 -8,563.0

Non-Standard Adjustments -60,205.0 -64,683.0 -56,458.0 -68,138.0 -58,070.0

Moody's-Adjusted EBITDA 385,794.0 768,655.0 595,050.0 809,016.0 487,091.0

All figures are calculated using Moody’s estimates and standard adjustments.Source: Moody’s Financial Metrics™

10 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 13

Bulgarian Energy Holding's select historical Moody's-adjusted financials

BGN Millions 2014 2015 2016 2017 2018

INCOME STATEMENT

Revenue 6,123 6,382 5,679 5,863 5,786

EBITDA 386 769 595 809 487

EBIT -151 201 14 202 -121

Interest Expense 100 137 169 170 170

Net Income -302 69 -122 80 -294

BALANCE SHEET

Total Debt 2,850 2,766 3,612 3,559 3,328

Cash & Cash Equivalents 394 824 1,023 1,254 1,339

Net Debt 2,455 1,942 2,588 2,305 1,989

Total Liabilities 6,596 7,160 6,995 7,128 6,984

Net PP&E 11,242 12,733 12,521 12,271 12,235

Total Assets 15,195 17,082 16,033 16,250 16,004

CASH FLOW

Funds from Operations (FFO) 180 795 778 729 701

Cash Flow from Operations (CFO) 497 981 -1,107 585 393

Cash Dividends -21 -15 -30

Retained Cash Flow (RCF) 159 795 764 729 671

Capital Expenditures -387 -406 -431 -282 -415

Free Cash Flow (FCF) 90 575 -1,552 303 -52

FFO / Net Debt 7% 41% 30% 32% 35%

RCF / Net Debt 6% 41% 30% 32% 34%

FCF / Net Debt 4% 30% -60% 13% -3%

FFO / Debt 6% 29% 22% 20% 21%

RCF / Debt 6% 29% 21% 20% 20%

PROFITABILITY

EBIT Margin % -2% 3% 0% 3% -2%

EBITDA Margin % 6% 12% 10% 14% 8%

INTEREST COVERAGE

FFO Interest Coverage 2.8x 6.8x 5.6x 5.3x 5.1x

LEVERAGE

Debt / Book Capitalization 24% 21% 27% 27% 26%

All figures and ratios are calculated using Moody’s estimates and standard adjustments.Source: Moody’s Financial Metrics™

Moody's related publicationsIssuer Comment:

» Bulgarian Energy Holding EAD - €77.1 million fine imposed by the European Commission is credit negative but decision reducesuncertainty

Issuer In-Depth:

» Bulgarian Energy Holding EAD: Energy market reform credit positive, but earnings visibility limited

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of thisreport and that more recent reports may be available. All research may not be available to all clients.

Endnotes1 The IGB project is a 3 billion cubic meter pipeline that connects Bulgaria with Greece. In Greece, the pipeline is linked to the so-called Southern Gas

Corridor, a sequence of pipelines that enable the shipment of gas from Azerbaijan to Europe. Bulgaria's access to gas will become more diversified once theproject is completed, which is planned for the second half of 2020.

11 4 November 2019 Bulgarian Energy Holding EAD: Update to credit analysis

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