LONDON (AFX) - Standard & Poor's Ratings Services said it revised its outlook on British Energy Group PLC British Energy Holdings PLC to negative from stable, and it affirmed the 'BB+' long-term corporate credit ratings on both entities.
'The outlook revision reflects Standard & Poor's concerns about the long-term performance of BE's nuclear fleet on the back of lower-than-expected output,' said Standard & Poor's credit analyst Beatrice de Taisne.
'Favorable market conditions, however, have sheltered BE from the financial consequences of its weaker-than-expected output.'
The ratings on BE and BEH reflect the exposure of cash flows to volatile wholesale electricity market prices; the risk of unplanned outages; weaker-than-expected nuclear output; higher-than-expected capital expenditure requirements; and increased collateral requirements, owing to high power prices, the agency said.
The ratings are also constrained by the group's position as a price taker in the wholesale power market, and the constraint on cash flows imposed by the cash-sweep mechanism that sweeps 65 pct of excess cash flows into the Nuclear Liabilities Fund, and allows the rest to be distributed to shareholders.
These risks are partially offset by BE's strong liquidity; considerably reduced outstanding debt service, with much stronger financial ratios following restructuring; supportive covenants; and fuel-supply agreements that provide a partial hedge against the risk of decreasing electricity prices, S&P said.
It remains concerned about the longer term prospects for nuclear output and structural problems with BE's nuclear fleet.
'The ratings could be lowered if operating performance falls below our revised expectations, particularly if the current high wholesale-price environment is not sustained,' said de Taisne.
'The outlook could be revised to stable if operating performance meets previous expectations, although the ratings will not be raised unless operational issues are resolved,' she added. newsdesk@afxnews.com joy/lam COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
'The outlook revision reflects Standard & Poor's concerns about the long-term performance of BE's nuclear fleet on the back of lower-than-expected output,' said Standard & Poor's credit analyst Beatrice de Taisne.
'Favorable market conditions, however, have sheltered BE from the financial consequences of its weaker-than-expected output.'
The ratings on BE and BEH reflect the exposure of cash flows to volatile wholesale electricity market prices; the risk of unplanned outages; weaker-than-expected nuclear output; higher-than-expected capital expenditure requirements; and increased collateral requirements, owing to high power prices, the agency said.
The ratings are also constrained by the group's position as a price taker in the wholesale power market, and the constraint on cash flows imposed by the cash-sweep mechanism that sweeps 65 pct of excess cash flows into the Nuclear Liabilities Fund, and allows the rest to be distributed to shareholders.
These risks are partially offset by BE's strong liquidity; considerably reduced outstanding debt service, with much stronger financial ratios following restructuring; supportive covenants; and fuel-supply agreements that provide a partial hedge against the risk of decreasing electricity prices, S&P said.
It remains concerned about the longer term prospects for nuclear output and structural problems with BE's nuclear fleet.
'The ratings could be lowered if operating performance falls below our revised expectations, particularly if the current high wholesale-price environment is not sustained,' said de Taisne.
'The outlook could be revised to stable if operating performance meets previous expectations, although the ratings will not be raised unless operational issues are resolved,' she added. newsdesk@afxnews.com joy/lam COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
© 2006 AFX News
