Hamburg’s Hamburger Energiewerke downgraded to ’A’ by Fitch
Investing.com -- Fitch Ratings has downgraded Hamburger Energiewerke GmbH’s (HEnW) Long-Term Issuer Default Rating to ’A’ from ’AA-’ with a Stable Outlook.
The downgrade reflects Fitch’s reassessment of HEnW’s relationship with the State of Hamburg under its Government-Related Entities Rating Criteria. The rating agency now views support as debt-like financing rather than equity-like instruments as previously expected.
This revision results in a top-down minus five notches approach from Hamburg’s ’AAA’ rating, compared to the previous minus three notches. Fitch still considers support from the State of Hamburg to be very likely, citing HEnW’s critical role as the largest heat supplier in the city and its mandated role in the energy transition.
HEnW’s Standalone Credit Profile remains at ’b-’, reflecting a very large capital expenditure program of approximately €2.2 billion for 2025-2029.
Fitch has reassessed HEnW’s government policy role to ’Strong’ from ’Very Strong’, while upgrading the precedents of support factor to ’Very Strong’ from ’Strong’. In October, the city completed an inaugural intercompany on-lending note to HEnW of €300 million due in 2045 through its newly established Finance Service Agency.
The profit and loss transfer agreement between HEnW and its immediate parent HGV remains valid until December 2033, protecting the company from potential losses. Hamburg has also issued a public budgetary resolution authorizing the city to provide guarantees on HEnW’s borrowings.
The updated capital expenditure forecast of €2.2 billion for 2025-2029 is approximately €0.4 billion above Fitch’s prior rating case, primarily reflecting cost overruns. About 42% of this spending will be allocated to district heating, 23% for replacing two coal-fired plants with cleaner capacity, 20% for renewables, and 15% mainly for connecting large companies to the network.
HEnW introduced a new district heating tariff in 2025 to recognize investment costs of the first decarbonization phase. Most contracts are expected to switch to the new tariff over 2026-2027, with full earnings improvement visible from 2028.
Despite these changes, Fitch forecasts funds from operations gross leverage to average about 13x over 2025-2029, indicating very high leverage. The company will require government support while implementing the legally mandated coal phase-out by 2030.
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