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Rating action

Scope Ratings GmbH (Scope) has today assigned long-term issuer and senior unsecured debt ratings of AAA to the City of Bergen (Bergen) in both local and foreign currencies, with Stable Outlooks. Additionally, Scope has assigned short-term issuer ratings of S-1+ in both local and foreign currencies, also with Stable Outlooks.

The assignment of Bergen’s AAA rating reflects:

• A well-integrated institutional framework, providing Norwegian municipalities strong fiscal equalisation, reliable funding, and coordinated policy implementation. The framework enables effective crisis response and supports an indicative municipal rating range of AAA to AA-, reflecting tight integration with the sovereign and a coherent sub-sovereign structure.
   
• A strong individual credit profile, supported by prudent financial management, robust liquidity, and a wealthy, diversified economic base. Bergen also benefits from sound governance and a favourable debt profile, which help mitigate risks associated with a rising debt burden. Increasing expenditure pressures are reflected in a weakening of operating margins, although the city has initiated saving measures aimed at restoring long-term fiscal sustainability. Low environmental risk exposure and the implementation of ambitious climate policies further support Bergen’s long-term credit fundamentals.

Key rating drivers

Strong intergovernmental integration with the Norwegian State. All Norwegian municipalities benefit from a well-integrated and highly supportive institutional framework, which underpins their strong credit quality. Scope’s evaluation of this framework leads to an indicative sector-wide rating range of AAA to AA-, reflecting municipalities’ close integration with the sovereign and the coherence of Norway’s sub-sovereign governance system.

The framework includes a comprehensive and predictable fiscal equalisation system, offsetting disparities in municipal revenues and costs through tax redistribution and grants. Income equalisation was further strengthened in the latest reform and symmetrically compensates 62% of discrepancies in tax revenues in 2025, further increasing to 64% in 2026. Additionally, top-ups are added for entities below 90% of the national average. Involuntary cost differences are fully equalised based on demographic and social criteria. Discretionary and regional policy grants further complement the system to address special conditions and support specific policy goals. This supports a stable operating environment and equitable service delivery.

Extraordinary support mechanisms are credible and well-structured. Municipal insolvency is not permitted, and the central government intervenes proactively through formal oversight to ensure obligations are met, as demonstrated during the Covid-19 and energy crises. In the revised budget for 2025, the national government has increased the transfers to municipalities to compensate for increased pension expenditures due to the new public contractual pension scheme.

However, Norwegian municipalities continue to face challenges in view of rising operating expenditures and high investment needs given limited revenue flexibility.

Municipalities enjoy considerable financial autonomy, with access to diversified funding sources including banks, bonds, and Kommunalbanken (KBN), which finances about half of municipal debt at favourable rates. Fiscal discipline is supported by strict legal oversight, requiring balanced budgets and timely deficit correction, with the ROBEK system enabling early intervention in cases of financial imbalance.

While operating under a shared tax framework, municipalities retain limited discretion over local income tax rates, fees, and charges, providing moderate fiscal flexibility. Norway’s multi-level governance is fully integrated, enabled by strong institutional coordination via the Norwegian Association of Local and Regional Authorities (KS) and decentralised administration, fostering effective policymaking and long-term stability.

Bergen’s robust individual credit profile reflects prudent financial management, low contingent liabilities, a wealthy and diversified economy, and strong governance. A favourable debt profile and solid liquidity position help mitigate risks associated with a rising debt burden. Although e operating margins are under pressure due to extraordinary spending needs, and a gradual drawdown of reserve funds, the city retains a degree of expenditure flexibility to support the restoration of long-term fiscal sustainability. Low environmental risk exposure and the implementation of ambitious climate policies further reinforce the city’s long-term credit fundamentals. Revenue flexibility remains modest and broadly in line with that of comparable Norwegian municipalities.

Prudent financial management and favourable debt profile. Bergen’s financial position is supported by a favourable debt profile, underpinning strong debt affordability. As of end-2024, the city’s financial debt had a weighted average maturity of 5.4 years, and by early 2025, around 60% of the debt carried fixed interest rates, including swap agreements. Most of Bergen’s financial debt consists of long-term loans raised via the Loan Fund to finance investments and housing-related lending. 20% of the total debt relates to on-lending activity, while 78% has been incurred to finance the city’s own investment projects. The city maintains a relatively diversified debt structure, including loans with Kommunalbanken (KBN) and the Nordic Investment Bank (NIB) at favourable interest rates (33% of total debt), loans from the Norwegian State Housing Bank (31%) and bonds (30%). As borrowing needs increase, interest payments are projected to rise to around 4% of operating revenue between 2025 and 2028, with net interest costs expected to increase from 1.7% in 2024 to an average of 2.4% over the same period. Nevertheless, debt affordability will remain solid, supported by discretionary income sources – such as fee income, government compensation, and interesting income – earmarked to cover interest payments on around 50% of total city treasury’s long-term debt. Additionally, the city limits the share of debt maturing within 12 months to 20%, helping to contain refinancing risk.

Robust liquidity position. The city’s debt profile is further supported by its robust liquidity position. Total liquidity stood at NOK 3.4bn at the end of 2024, mostly consisting of ordinary city treasury’s bank deposits (NOK 1.4bn) and loan funds bank deposits (NOK 1.9bn). Liquidity declined by around NOK 1.5bn between 2023 and 2024, due to a weakening operating balance, an increasing accumulation of unearned pension premiums, and accelerated payments for the Bossnett project to improve waste management, which progressed faster than expected. Despite this decline, Bergen’s liquidity metrics remain strong, with total bank deposits and cash covering almost three times annual interest payments, 1.6 times the total debt service in 2024 and accounting for 11.4% of total debt. Weaker operating margins will likely have a negative impact on liquidity, which the city expects to remain somewhat lower this year than in the past. At the same time, the proposed budget framework mechanism for requesting liquidity loans if needed will enable Bergen to effectively meet potential liquidity shortages. To date, the city does not expect to request any liquidity loan this year. As of 14 May 2025, Bergen held NOK 1.9bn in ordinary bank deposits, ensuring coverage of at least 60 days of operating expenditure without new borrowing, as requested by the city’s financial regulation.

Bergen’s exposure to contingent liabilities remains limited and low risk. Bergen’s total guarantees and guaranteed loans amounted to NOK 240m at the end of 2024, accounting for only 0.8% of total operating revenue. Most of the guarantee volume relates to simple guarantees to BIR AS, one of the largest Norwegian waste management companies. In 2024 no guarantees were used, while a minimal amount of NOK 10m was activated in 2023. Additionally, pension-related liabilities are well-covered, with pension funds accounting for 110% of obligations at the end of 2024, reducing long-term financial strain. This strong coverage ratio reinforces Bergen’s ability to manage its long-term obligations without compromising financial stability.

Strong, wealthy, and diversified local economy. Being the capital of Western Norway, Bergen’s economy benefits from one of the strongest and fastest growing industrial environments in the country. Bergen has more than 50% of Vestland’s total employees and accounts for 64% of the value creation of the county’s business sector. This includes many large and internationally relevant companies, mostly in the sector of oil and gas energy production. Other important sectors include renewable energy production, marine and maritime industry, tourism, finance and media. In addition, Bergen is a large university city with around 45,000 students, benefiting from direct access to a large base of highly skilled workers. Demographic trends are also favourable. Between 2023 and 2024 the population in Bergen increased by 0.6%, reaching 291,940 inhabitants, strongly driven by continuous inflows of immigrants, particularly from Ukraine. Registered immigrants accounted for 20% of Bergen’s population in 2024. The population growth rate in the last year was below the national average of 0.8% and below that of other major cities such as Oslo or Trondheim, given a marginal decline in 0-19 years old. However, Bergen’s population accounts for more than 5% of Norway’s population and further increased to 293,709 at the beginning of 2025. Statistics Norway’s baseline scenario projects Bergen’s population to reach 321,493 inhabitants by 2050, a 9.4% increase from 2025.

Despite these strengths, Bergen faces two key challenges:

Rising budgetary pressures and erosion of fiscal buffers. Bergen continues to face rising budgetary pressures, reflected in weakening operating results and a drawdown of contingency reserves. Operating revenue grew at a solid rate of 4.4% over 2022-24, supported by higher framework grants, related to the integration of refugees from Ukraine, and strong dividend income from municipally owned entities Eviny AS and BIR AS. Nevertheless, tax revenue growth slowed down considerably, increasing by just 1.5% in 2024 compared to the originally estimated 5%, following an already subdued performance in 2023. Moreover, operating expenditure significantly outpaced operating revenue, rising by an average of 7.3% over 2023-24. Inflationary pressures contributed to elevated personnel costs and higher spending across key service areas, including childcare, special education, healthcare, social assistance, housing and transport. As a result, the operating balance-to-operating revenue ratio declined from 7.3% in 2022 to 4.7% in 2023 and further to 2.4% in 2024.

Bergen has offset the deterioration in operating performance by drawing on reserve buffers accumulated in previous years. The unrestricted contingency fund declined by NOK 1.1bn in 2024, from NOK 4.4bn to NOK 2.9bn (9.8% of operating revenue, just below the city’s 10% target). Scope expects the operating balance-to-operating revenue ratio to remain low in the coming years given continuous pressures on service spending, high personnel costs and increasing interest expenses amid rising debt. Additional revenue sources, such as dividends from the energy company Eviny AS and the utility BIR AS are estimated at NOK 420-440m annually over 2025-28, at lower levels compared to previous years and likely to be volatile, as they depend on fluctuations of energy prices. While the dividends support revenue flexibility, together with increased unearmarked grants and user fees, scope for additional increase in own revenues remains modest. Changes to the equalisation introduced in 2025 are expected to bring minor gains of approximately NOK 20m.

To compensate for ongoing extraordinary expenditure, Bergen plans to continue drawing down the contingency fund by NOK 400–500m annually. Allocations to the funds will also be lower in the coming years, estimated to decline from NOK 345 in 2024 to NOK 100m per year between 2025 and 2028. As a result, the unrestricted contingency fund will amount to 3% of operating revenue by 2028.

In response to these fiscal challenges, Bergen has adopted a saving and efficiency plan beginning in 2025 aimed at realigning expenditure with revenues across both the operating and capital budgets. The city retains some expenditure flexibility, given a share of personnel-to-total expenditure lower than peers - at 45.4% on average in 2022-24 – compared to a peer average of 49.5% – together with a proven ability to reprioritize investments. The plan includes NOK 400m cuts in operating costs between 2025 and 2028, as well as measures to reprogramme and optimize investment spending. However, given the continuous strong increase in crucial service needs, the effective implementation of measures to improve economic sustainability will take time and further saving efforts are likely to be needed.

Rising debt burden amid high investment levels. Bergen’s financial debt increased to NOK 29.1bn in 2024, up NOK 2.4bn from the previous year. When excluding unused loans, the city treasury’s debt totalled NOK 28.46bn last year, up from NOK 26.2bn in 2023. As a share of operating revenue, total financial debt steadily increased from 89% in 2020 to 98% in 2024, amid increasing borrowing for high investment activity, although remaining in line with the peer average. Scope expects the debt-to-operating revenue ratio to continue increasing going forward, up to around 116% by 2028. Bergen plans to implement investments for NOK 13.5bn between 2025 and 2028, mostly in the service areas of schools, kindergartens, elderly care, sport, culture, transport, housing, water and sewage. While part of the investment spending will be covered via fee revenues and other self-financing funds (NOK 3bn), most of the projects will be financed via additional borrowings. The favourable debt profile and conservative financial management, however, help to mitigate the risks coming from increasing indebtedness. Moreover, in the new 10-years investment programme the city proposes to reduce planned investments to NOK 2.2bn per year, to preserve debt sustainability.

Rating-change drivers

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the coming 12 to 18 months.

Downside scenarios for the rating and Outlooks are (individually or collectively):

1. Norway’s sovereign ratings/Outlooks were downgraded.
    
2. The institutional framework materially weakened resulting in lower municipal integration in institutional arrangements.
    
3. Bergen’s individual credit profile weakened significantly.

Qualitative Scorecards (QS1, QS2)

Scope’s institutional framework assessment determines the intergovernmental integration between sub-sovereigns and their rating anchor, which is the sovereign or a higher-tier government. To perform this assessment, Scope applies the Institutional Framework scorecard (QS1), centred on six analytical components: i) extraordinary support and bailout practices; ii) ordinary budgetary support and fiscal equalisation; iii) funding practices; iv) fiscal rules and oversight; v) revenue and spending powers; and vi) political coherence and multilevel governance.

Scope considers the institutional framework under which the Norwegian sub-sovereigns operate to display ‘full’ integration for: i) ordinary budgetary support and fiscal equalisation. The institutional framework displays ‘strong’ integration for: i) extraordinary support and bailout practices; ii) funding practices; iii) fiscal rules and oversight; iv) revenue and spending powers; and v) political coherence and multilevel governance. Consequently, Scope’s assessment results in an indicative downward rating distance of up to three notches between Norway’s sovereign rating (AAA/Stable) and the rating of an individual sub-sovereign.

Furthermore, Scope assesses the individual credit profile based on quantitative and qualitative analysis of four risk categories: i) debt and liquidity; ii) budget; iii) economy; and iv) governance. These are further complemented by additional adjustments for environmental and social factors & resilience.

The outcome of these assessments, as reflected in the application of the Individual Credit Profile scorecard (QS2), is an individual credit profile score for Bergen of 80 out of 100.

The mapping of this score to the range defined by the Institutional Framework assessment results in an indicative rating of ‘aaa’ for Bergen.

The review of potential exceptional circumstances that cannot be captured by the Institutional Framework and Individual Credit Profile scorecards did not lead to further adjustments to Bergen’s indicative rating.

As such, the final rating corresponds to the indicative rating of AAA.

Environment, social and governance (ESG) factors

ESG factors material to Bergen’s credit quality are captured by Scope’s rating approach through several analytical areas.

Governance factors are a fundamental strength of Bergen’s credit profile, reflected in both the institutional framework and the city’s individual governance characteristics. Operating within Norway’s highly institutionalised and rules-based local government system, Bergen benefits from a well-defined fiscal framework, central oversight mechanisms, and strong local autonomy. The institutional framework is assessed as ‘strong integration’, supported by balanced budget requirements, debt controls, and central government supervision. Bergen’s individual governance is assessed as ‘stronger’, reflecting transparent decision-making, effective financial management, and prudent long-term fiscal planning. The city maintains consistent alignment between policy goals and financial execution, underpinned by stable administration and solid internal controls. Moderate and targeted capital investment further supports institutional resilience and infrastructure sustainability.

Social factors are captured under Scope’s assessment of Bergen’s ‘economic sustainability’ and ‘social factors and resilience’. Bergen benefits from favourable demographic trends, including a lower old-age dependency ratio (27% in 2025) compared to the national average (32%), and steadily increasing population numbers. Income inequality is low (Gini coefficient of 0.25, aligned with the national value), and access to public services such as healthcare and education is robust. Per capita spending in primary and secondary education and health services is aligned with the peer average, although remaining somewhat below the national average. Continued investment in these service areas testifies to the city’s commitment to safeguarding service quality as demographic pressures evolve. Overall, Bergen’s strong social infrastructure and equitable service provision contribute to a resilient and inclusive socioeconomic environment.

Environmental factors are incorporated into Scope’s assessment of Bergen’s ‘environmental factors and resilience’, which is rated as ‘stronger’. Bergen demonstrates solid environmental resilience, including one of the lowest per capita carbon intensities among Norwegian cities, despite its large population, and a strong track record of GHG emissions reduction. Bergen was able to cut GHG emissions by 25% between 2009 and 2022, compared to 7% elsewhere in the country. Most of the reduction was achieved through lower emissions from road traffic (-42%, accounting for 35% of direct emissions in 2022) and heating (-77%, although accounting for only 2% of direct emissions) Other relevant sectors such as energy supply, shipping and aviation did not record a material reduction. In its ‘Green Strategy’ Bergen set very ambitious targets, aiming to reduce GHG emissions by 85% by 2030 and to become a 1.5-degree society by 2050. The gap currently estimated between the action and target pathway to reach the 85% reduction by 2030 is largely explained by the fact that Bergen’s goal is more ambitious than Norway’s climate target (55% emission reduction by 2030). For several sectors, local measures to reduce emissions will need to be complemented by national-level action to achieve the target. Investment in emission-free public transport, green infrastructure, and energy efficiency reinforces the city’s transition preparedness. Bergen’s progress on environmental goals supports its long-term credit profile by reducing exposure to physical and transition risks.

Rating committee
The main points discussed by the rating committee were: i) institutional framework; ii) debt burden, liquidity profile and contingent liabilities; iii) debt management strategy; iv) budgetary performance and flexibility; v) regional socio-economic and demographic developments; vi) peer comparison; and vii) environmental and social factors.

Methodology
The methodology used for these Credit Ratings and Outlooks, (Sub-Sovereigns Rating Methodology, 11 October 2024), is 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 Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Alessandra Poli, Analyst
Person responsible for approval of the Credit Ratings: Jakob Suwalski, Executive Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 30 May 2025.

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.
As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 "EU CRA Regulation"), the ratings on Bergen are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar (see "Publication Calendar 2025 Sovereign, Sub-Sovereign and Supranational Ratings" published on 28 April 2025 on www.scoperatings.com). Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case the deviation from Scope’s published calendar was due to the first-time publication of the ratings.

Conditions of use / exclusion of liability
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