S&P ups Transelectrica outlook to positive

Standard & Poor's said it revised its outlook on Romania-based C.N. Transelectrica SA to positive from stable and affirmed its BB long-term corporate credit rating.

S&P said the outlook revision reflects the reduced risk of adverse, politically influenced actions following the introduction of a more transparent regulatory revenue cap regime for electricity transmission tariffs in 2005 and the continued improvement in Romania's macroeconomic stability. Increases in transmission tariffs, based on the new regulatory regime, have also been higher than previously anticipated in 2004.

The rating on Transelectrica is constrained by exposure to the Republic of Romania's (BBB-/stable/A-3) economy, which is weaker and less stable than that of most Western European economies; major capital expenditure requirements, which translate into increasing debt levels; limited access to liquidity and financial flexibility and remaining payment collection problems, the agency said. Privatization of a 10% stake in the company is envisaged during the first half of 2006.

S&P said the rating on Transelectrica is supported by its position as Romania's monopoly transmission system operator, governed by a relatively benign cost-cover tariff regulation, and by its robust operating performance.

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