S&P: Eesti Energia outlook negative

Standard & Poor's said it revised its outlook on Estonia-based electric utility Eesti Energia AS to negative from stable and affirmed its A- long-term corporate credit rating.

"The outlook revision reflects the risk of weakening credit quality as a consequence of a potential restructuring and split-up of Eesti Energia," said S&P credit analyst Andreas Zsiga.

The government minister responsible for state-owned Eesti Energia has recently initiated a review of the company's structure to examine the possibility of splitting up the company's competitive generation and supply business from its monopoly transmission and distribution operations.

"Given the higher business risk of competitive operations compared with the monopoly business, this could have negative ratings implications," added Zsiga. These could be aggravated or alleviated depending on the allocation of debt between any new companies in the event of split-up, and how the risk of a technical default under existing borrowing agreements is handled.

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