Austran Holdings A$500M CP Program Rated A-2 by S&P.
GPU PowerNet operates under a stable and predictable regulatory regime, has a good operational record, and is insulated from competitive pressures by its natural monopoly status and regulatory protection. These strengths are offset by an aggressive financial profile. The ratings on Austran Holdings are also affected by the credit quality of GPU Inc. and subsidiaries.
GPU PowerNet's revenue is initially determined under a tariff order put in place by the Victorian government before GPU PowerNet's privatization. Transmission prices have been set under this tariff order until January 2003, which provides GPU PowerNet considerable medium-term cash flow certainty and stability. GPU PowerNet's customers are the Victorian Power Exchange and the Victorian distribution businesses and generators. Revenue certainty is enhanced by the lack of electricity volume risk to GPU PowerNet.
GPU PowerNet's function is an essential element of the state's economic infrastructure. High-voltage electricity transmission services in Victoria are a natural monopoly, and are not directly affected by the competition in the generation and retail segments. Amid the continuing industry reform at state and federal levels, GPU PowerNet's business position is sound.
Austran Holdings has been highly leveraged initially, however, Standard & Poor's expects Austran Holdings' financial profile to improve in the coming years as the acquisition finance is refinanced, and as internally generated cash flow is used to retire debt. Initial gearing (total debt-to-total capital) is relatively high at 74%, and funds flow interest coverage is initially modest at 1.7 times (x). The low level of business risk enables a strong investment grade rating, although the rating incorporates the expectation of a steadily improving financial profile, Standard & Poor's said.---CreditWire
CONTACT: Anthony Flintoff, Melbourne (61) 3-9250-4562 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com