Fitch Affirms Poland's Tauron at 'BBB'; Stable Outlook .

By bne IntelliNews July 5, 2011
Fitch Ratings has affirmed Tauron Polska Energia Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB' with Stable Outlooks, rating agency said in communique. "The rating reflects Tauron's (Tauron group, comprising Tauron and its subsidiaries) solid market position in the Polish power sector, limited diversification of the fuel mix in generation and prudent financial policy. Fitch believes that thanks to its low financial leverage, Tauron has substantial rating headroom to co-fund its ambitious medium-term capex plan with debt and maintain the current rating," report reads. Fitch notes that at end-2010, Tauron substantially improved its structural subordination issue by raising new debt at group's mother unit and repaying most of the debt at the subsidiary level. At YE10, around 60% of total debt was issued at the holding level (compared to zero at YE09). This improves the position of Tauron S.A.'s creditors as they previously had weaker access to the cash flows of Tauron subsidiaries (where most cash flow is generated) than creditors lending directly to the subsidiaries, especially as 83% of debt was secured on fixed assets at YE09 and the current bond programme of Tauron is unsecured. Furthermore, Fitch expects that all new debt will be raised at the holding level and the remaining debt at the subsidiaries level will be almost fully repaid within two to three years. Progress in operational integration and application of a central financing model (including cash pooling and internal bond programme) reinforces Fitch's view that structural subordination has ceased to be a constraining factor for Tauron's IDR. Tauron posted consolidated net profit of PLN 382.47 mn in Q1/2011 vs. PLN 291.81 mn profit a year earlier. The result came in better than market expectations of a PLN 317 mn profit on the average. Consolidated revenue amounted to PLN 5299.07mn vs. PLN 3794.33mn a year earlier.

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