The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating of ALTEO Nyrt. (ALTEO) at BBB-/Stable. Concurrently, Scope has affirmed the BBB- senior unsecured debt rating and the S-2 short-term debt rating.

The affirmation reflects Scope's view that ALTEO will be able to withstand pressure on credit metrics from rising debt levels due to increased expansion investments, as these should be largely offset by the related EBITDA growth. The rating is also supported by the addition of new renewable capacity, an expected increased share of regulated income as well as new revenue streams from waste management.

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

Key rating drivers

Business risk profile: BB+ (unchanged). ALTEO’s limited geographic presence and comparatively small size remain constraints. However, Scope notes that the company is strengthening its competitive position through acquisitions and growth investments. The focus remains on new renewable capacities and battery storage. The new 70 MW energy storage project, which will operate under fixed compensation for at least 10 years, ensures ALTEO’s solid market position. In 2024, ALTEO added new renewable capacities to its generation portfolio through the acquisition of Mov-R Kft., which operates 12 wind turbines with a total capacity of 24 MW, followed by the acquisition of Aerope Kft., which owns a solar farm project with an installed capacity of 20 MW. This will further reduce concentration risks associated with the current generation portfolio (around 200 MW). In addition, the company’s ability to provide grid balancing through its virtual power plant reduces transition risks (credit-positive ESG factor). ALTEO’s expansion of its waste management arm through the acquisition of ÉLTEX, a leading waste management company in Hungary, improves business diversification and mitigates cash flow volatility from the exposure to renewable generation.

In 2024, ALTEO continued to perform well in terms of profitability. The Scope-adjusted EBITDA margin* stood at 20%, supported by: i) an increased share of high margin renewable energy production; and ii) greater profitability in the waste management segment. Between 2025 and 2027, Scope expects EBITDA margin to deteriorate to between 13%-15%, due to continued investments in the lower margin waste management segment including the lower profitability of the recently acquired ÉLTEX. Trading activities also dilute profitability. On the other hand, margins will be supported by a growing share of regulated income from an energy storage project, which will operate under fixed compensation scheme from April 2026.

Financial risk profile: BBB+ (unchanged). ALTEO’s solid financial risk profile supports the rating. However, Scope highlights ALTEO’s ongoing investment phase, which is focused on organic and dynamic growth. This includes the development of an energy storage, representing the company’s largest greenfield investment to date (estimated net capex of HUF 20bn), followed by the acquisition of ÉLTEX at the end of 2024. While these investments are expected to be partially financed by current operating cash flow and the available cash buffer, a large proportion will be financed by new debt. As a result, Scope expects leverage – as measured by debt/EBITDA – to peak at above 2.5x in 2025 and then gradually decreasing to below 2.0x in 2027 due to anticipated debt repayments and improved operating performance, with EBITDA expected to reach HUF 19-23bn in the medium term (2024: HUF 19bn). Similarly, Scope anticipates that cash flow cover (free operating cash flow/debt) will be strongly negative in 2025, driven by increased capital expenditures, before rebounding to a positive range of around 25% as a result of the expected reduction in capex.

Medium-term debt protection (EBITDA interest cover) is expected to settle between 5x-8x. In the past, debt protection was largely supported by low leverage and substantial interest income from bank deposits. However, ALTEO's interest cover is expected to be negatively impacted by the growing debt exposure and lower overall interest income from deposits, since the company is using its accumulated cash buffer to finance investments.

Scope points out that while the capex guidance for 2025 includes already secured investments, there is limited transparency regarding 2026 and 2027, for which capex guidance only relates to already approved spendings. The rating agency therefore believes that credit metrics may come under pressure after 2025, should ALTEO decide to pursue new growth opportunities.

Liquidity: adequate (unchanged). Scope has limited concerns regarding short-term debt coverage in the coming years. Upcoming debt maturities between 2025 and 2027, totalling HUF 21.8bn, are expected to be covered by unused available credit facilities of HUF 45bn and the remaining cash buffer of HUF 10bn at the end of 2024.

Supplementary rating drivers: credit-neutral (unchanged). Scope expects shareholder remuneration to continue to be linked to ALTEO's operating performance and believes it is unlikely to jeopardise credit quality. Shareholder remuneration would likely be adjusted if necessary to preserve the company's credit profile. At the same time, Scope highlights the company’s ambitious development strategy focused on continual M&A and growth investments. Such rapid and debt-funded growth could lead to volatile financial results and deteriorating leverage. Scope has factored this risk into the issuer’s financial risk profile and standalone credit assessments. However, future adjustments remain possible should the company's aggressive financial policy have a significant impact on its risk profile.

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

Outlook and rating sensitivities

The Stable Outlook reflects Scope's expectation that ALTEO's financial position will remain solid in the context of its expansion strategy, as evidenced by medium-term leverage (debt/EBITDA) of between 1.5x-2.5x and EBITDA interest cover of 5x-8x. The Outlook does not consider large-scale or transformational acquisitions.

The upside scenario for the ratings and Outlook is:

1. A positive rating action is considered unlikely in the foreseeable future due to the company’s limited size and scope

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

1. Debt/EBITDA above 4.0x on a sustained basis
    
2. EBITDA interest cover below 4.0x on a sustained basis
    
3. Financial policy is perceived as becoming more aggressive

Debt ratings

Scope has affirmed the BBB- rating for senior unsecured debt issued by ALTEO. This is aligned with Scope’s general rating approach for the senior unsecured debt of investment-grade rated issuers.

ALTEO’s short-term debt rating has been affirmed at S-2. This is based on the BBB-/Stable issuer rating and the company’s solid liquidity profile, characterised by consistently strong liquidity and adequate access to external funding channels.

Environmental, social and governance (ESG) factors

Scope’s sees ALTEO’s combined operation of volatile renewable energy power plants, cogeneration, and storage facilities as a positive environmental credit driver. These are operated individually and also as a combined ‘virtual power plant’ through the company’s own Power Plant Control Centre. The virtual power plant allows several small stand-alone power plants to enter the electricity and system services market as a single, large power plant. This makes it a very effective, flexible, and economical energy production technology. In this way, ALTEO can meet outright demand and provide balancing capacity to the national grid operator, which supports its credit quality in terms of market position, profitability, and cash flow.

All rating actions and rated entities

ALTEO Nyrt.

Issuer rating: BBB-/Stable, affirmation

Short-term debt rating: S-2, affirmation

Senior unsecured debt rating: BBB-, 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), 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: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 7 August 2019. The Credit Ratings/Outlook were last updated on 27 May 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
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.