DTEK out­look sta­ble

The Pak Banker - - COMPANIES/BOSS -

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.

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