Fitch Drops Contact to BBB

Ratings agency Fitch has downgraded Contact Energy Ltd to a BBB credit rating from BBB+, reflecting a rising borrowing profile as new generation plant and underground gas storage facilities are installed, and the significant impact of national grid constraints on the company's full year profit.

"Whilst the 2009 financial year proved challenging for Contact largely as a result of transmission and weather issues, it is the weakening of credit metrics which has placed the rating under pressure," Gavin Madson, director of Fitch's Asia-Pacific Energy & Utilities team, said.  

Contact Energy managing director David Baldwin said the rerating brought Fitch into line with rival ratings agency Standard & Poor's. Contact expected its credit metrics to "significantly improve" around mid--2012 when current capital expenditure projects were completed, and constraints on the Cook Strait cable should have been fixed by the national grid operator, Transpower. 

Fitch said "in the long-term, the capital expenditure programme, and in particular the Stratford gas-fired plant and Ahuroa storage facility, will improve Contact's operational flexibility and add further diversification to its generation portfolio". 

Although Contact is 51.4% owned by Origin Energy Ltd. ('BBB+'/Rating Watch Positive), under Fitch's parent and subsidiary rating methodology, the agency assesses the links between the two companies to be insufficient to warrant any uplift to Contact's ratings for parental support 

Businesswire.co.nz

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