DTEK outlook stable

Global rating agency Fitch has affirmed DTEK Holdings Limited's foreign currency Long-term Issuer Default Rating (IDR) at 'B' and local currency Long-term IDR at 'B+' with Stable Outlooks and simultaneously withdrawn the ratings. At the same time, the agency has assigned DTEK Holdings B.V. (DTEK) a foreign currency Long-term IDR of 'B' and local currency Longterm IDR of ' B+' with Stable Outlooks. Fitch has also affirmed DTEK Finance B.V.'s notes' senior unsecured rating at 'B' and DTEK Finance plc's notes' expected senior unsecured rating at ' B(EXP)'. The notes benefit from guarantees and sureties from several holding and operating companies, all owned by DTEK, together referred to as DTEK Group. A complete list of ratings actions is at the end of this release.

The withdrawal of DTEK Holdings Limited's IDRs and assignment of IDRs to DTEK Holdings B.V. (DTEK) reflect the fact that DTEK is now the ultimate holding company of DTEK Group representing the security and guarantor group for the notes. DTEK prepares audited consolidated accounts for DTEK Holdings B.V. DTEK's 'B+' local currency Long-term IDR continues to reflect the company's unconstrained credit profile while the 'B' Long-term IDR remains constrained by Ukraine's Country Ceiling ('B').

DTEK's ratings reflect its leadership in coal mining, power and heat generation, electricity distribution and sales among Ukraine's ('B'/Stable) utility companies. With installed electric capacity of over 18 gigawatts (GW) at end-2012, DTEK ranks among the largest Fitch-rated CIS power utilities. Fitch believes that DTEK's UAH5bn M&A programme is completed, and does not anticipate significant new acquisitions over the medium term.

Ukrainian Power Market Constrains DTEK's Profitability

The Ukrainian power sector, which accounted for over 90% of DTEK's consolidated revenue in 2012, is heavily regulated. Changes in Ukraine's power consumption correlated well with its GDP growth, which the agency forecasts at 2.5% in 2012 and 3.5% in 2013. Fitch believes that while the expected deregulation of the Ukrainian power sector may help DTEK improve its profitability in the future, significant increases in electricity demand and prices are unlikely given the vulnerable state of the national economy.

DTEK is planning to spend nearly UAH56bn (USD7bn) on its capital investment programs between 2013 and 2016. The agency expects that DTEK's capex program, although flexible, will be partially debt funded. This new debt, combined with acquisition debt that DTEK raised in 2011-2012, will result in steady leverage over the medium term, in Fitch's view.