S&P confirms Edison Mission Energy Funding

Standard & Poor's confirmed its BB rating on Edison Mission Energy Funding Corp.'s (The Big Four) senior unsecured bonds, $23.3 million series A due Sept. 15, 2003 and $190 million series B due 2008. The outlook is developing.

S&P said the four power projects that make up The Big Four continue to perform well as they did during 2002.

The rating of the projects' primary power offtaker, Southern California Edison Co. (BB/developing), continue to constrain the rating pending S&P's assessment of how the California Public Utility Commission's regulatory decisions will determine the direction of Southern California Edison's future credit quality.

As S&P reported on Aug. 27, Southern California Edison's potential for investment-grade ratings hinges on the CPUC's establishment of a clear track record of regulatory decisions that implement AB 57 and translate into strong and predictable cash flows in coming years.

Last month, California's Supreme Court decided that the CPUC complied with substantive and procedural requirements of California law in entering into a settlement agreement with Southern California Edison. That decision should facilitate a favorable decision by the federal Ninth Circuit Court of Appeals that is hearing the legal challenge to the settlement, S&P said.

S&P confirms Salton Sea

Standard & Poor's confirmed Salton Sea Funding Corp.'s $592 million senior secured bonds series B, C, E and F. The outlook is developing.

S&P said the ratings reflect the credit strength of the primary power offtaker, Southern California Edison Co.

The various geothermal power projects that support Salton Sea's debt continue to operate well despite an extensive maintenance outage at some of plants earlier in the year, S&P said.

The rating of the projects' primary power offtaker, Southern California Edison Co. (BB/developing), continue to constrain the rating pending S&P's assessment of how the California Public Utility Commission's regulatory decisions will determine the direction of Southern California Edison's future credit quality.

As S&P reported on Aug. 27, Southern California Edison's potential for investment-grade ratings hinges on the CPUC's establishment of a clear track record of regulatory decisions that implement AB 57 and translate into strong and predictable cash flows in coming years.

Last month, California's Supreme Court decided that the CPUC complied with substantive and procedural requirements of California law in entering into a settlement agreement with Southern California Edison. That decision should facilitate a favorable decision by the federal Ninth Circuit Court of Appeals that is hearing the legal challenge to the settlement, S&P said.

S&P confirms CE Generation

Standard & Poor's confirmed CE Generation LLC's senior secured bonds at BB-. The outlook is developing.

CE Generation, which is owned 50% by MidAmerican Energy Holdings Co. (BBB-/positive) and 50% by TransAlta Corp. (BBB-/stable), is the holding company for MEHC's interests in its U.S. qualifying facilities. Although the cash flows come from a number of projects, the portfolio effect is limited in that CE Generation debt service is structurally subordinate to about $494 million of project level debt, which excludes Salton Sea Funding Corp.'s (BB/developing) $138 million of debt allocated to a zinc project, which MEHC guarantees.

In addition, $341 million of the project level debt is serviced from cash flows that come from Southern California Edison Co. (BB/developing). Over time, cash flows will increasingly come from Salton Sea. In addition, CE Generation will face increasingly greater exposure to merchant risk as QF contracts expire in 2003 and 2009, as well as market price exposure to Southern California Edison's avoided costs after 2007.

Moody's rates Evraz notes B3

Moody's Investors Service assigned a provisional B3 rating to Evraz Securities SA's proposed $175 million guaranteed senior unsecured notes due 2006 and confirmed Mastercroft Ltd.'s B1 senior implied rating. The outlook is stable.

Moody's said the confirmation of Mastercroft reflects the historical underperformance of both NTMK and Zapsib, which resulted in bankruptcy prior to majority ownership by Mastercroft; the challenges facing Mastercroft in managing its evolution from a trading company to successful manager of integrated steel mills in Russia; the complexity of Mastercroft's operating and legal structure; the existence of minority shareholders at both mills which may impede implementation of Mastercroft's strategy; and limited shareholder transparency and limited history of IAS financial statements and systematic reporting.

Mastercroft is highly cash generative and is forecast to remain so under the current operating environment, however, operating cash flows are exposed to any potential slow down in Russian steel market growth, in particular with respect to demand for its products from primary industries; its high dependence on a single customer for its key railway products; and potential fluctuations in price and supply of raw materials and supplies, including iron ore, electricity and rail transport.

The affirmation also reflects Mastercroft's leading position in the Russian steel industry, particularly its dominant position in selected domestic long products; the group's relatively low debt levels and leverage; improving yields and focus on low cost steel production; the group's strongly free cash flow operations; proximity to and ownership of key raw materials, including iron ore and good transport access to all major Russian regions and markets.

Evraz Securities is a special purpose vehicle guaranteed unconditionally and irrevocably on a senior unsecured basis by Mastercroft and its key majority owned integrated steel subsidiaries OAO Nizhny Tagil Iron & Steel Plant and OAO West-Siberian Iron & Steel Plant (Zapsib).

Fitch rates Evraz notes B

Fitch Ratings assigned a B rating to by EvrazSecurities SA's planned notes due 2006 and a B senior unsecured rating to Mastercroft Ltd. The outlook is stable.

Mastercroft and its subsidiaries OJSC Nizhny Tagil Iron and Steel Plant, OJSC Western Siberian Iron and Steel Plant in Russia, and U.K.-based Ferrotrade and Co. will unconditionally and irrevocably guarantee the notes.

The rating reflects Mastercroft's position as one of Russia's largest steel producers and the 14th largest in the world, Fitch said. It holds leading domestic market positions in long steel products and a monopoly position in railway transport steel products, with its main customers in the railway, construction and pipe-producing industries.

The domestic market accounted for half of the group's turnover in fiscal 2002. Although the group was created in 1992, the current corporate structure is principally the product of the recent combination of two Russian steel plants, NTMK and Zapsib. These two steel producers jointly operate under the new structure as Evraz Holding, which acts as the group's management company. As fiscal 2002 was Evraz's first financial year since consolidation, Fitch notes that there is a lack of a historical track record for Mastercroft under the new structure.

The rating also factors in the limited transparency with respect to Mastercroft's complicated ownership structure, which includes several tiers of offshore and Russian companies, Fitch said.

Fitch noted that pro forma fiscal 2002 performance remained good compared to fiscal 2001, with a healthy EBITDA margin of 16.2% and a positive (pre-dividend) net free cash flow. Future cash generation will depend on the group's investment plans and capital expenditure requirements. Its financial profile provides some flexibility, with fiscal 2002 leverage (total consolidated debt/consolidated EBITDA) ratio of 0.8x, well within the leverage ratio of 3x outlined in the limitation of indebtedness covenant in the notes' terms and conditions.

Moody's rates Antam bonds B3

Moody's Investors Service assigned a provisional long-term foreign-currency rating of B3 to the proposed bonds of Antam Finance Ltd., a wholly owned subsidiary of PT Antam TBK. The outlook is stable.

Moody's said the rating reflects Antam's position as a small-sized nickel, gold and bauxite mining company, its operating track record in Indonesia, its favorable reserve life and its relatively competitive cost position, which benefits from the integrated nature of its nickel business. The diversity evident in the company's business also provides support for the rating.

The rating also reflects the volatility of Antam's cash flow due to fluctuations in nickel prices, and construction and execution risk related to the company's proposed third ferronickel smelter and the associated power plant. In addition, the rating considers the company's strategy to materially increase its financial leverage (albeit from a relatively low base) to fund the construction of the third smelter and the associated power plant.

Other factors driving the rating include a degree of regulatory uncertainty and other operating challenges in Indonesia, such as labor relation issues.

Proceeds from the bonds will be used to help fund construction of the new smelter, which will more than double Antam's ferronickel smelting capacity to 26,000 tons per annum from 11,000 tons, Moody's noted.

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