The upgrade is driven by ALTEO’s improved financial risk profile and bolstered by the company’s new shareholder structure that provides comfort about ALTEO’s investment-grade credit quality.

The rating's placement under review reflects the takeover bid for all of ALTEO’s capital by a consortium led by Hungarian oil and gas incumbent MOL Group.

The affirmation is driven by Scope’s unchanged view about ALTEO’s moderate credit profile along the company’s planned HUF 20bn bond programme, representing significant extra debt exposure.

Scope expects credit metrics to revert to levels in line with a BB+ rating. This is driven by ALTEO’s partially debt-funded investment, higher dividends and the expectation of normalised operating performance after extraordinary results in 2021-2022.

The affirmation reflects ALTEO’s growing business outreach as it implements its investment programme while keeping its financial profile commensurate with the rating.

New issuance of senior unsecured debt does not alter ALTEO’s rating case, which largely reflects debt-financed EBITDA growth over the next few years.

The affirmation is driven by the robust cash flow stemming from the balanced mix of regulated and unregulated activities. The execution of the updated investment programme is also unlikely to significantly burden indebtedness and interest coverage.

The rating is supported by increasing cash flows from regulated power generation, the quasi-monopolistic position in heat, and comfortable level of interest coverage. Leverage is expected to decline gradually following the heavy investment phase.