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June 18 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed APETRA’s Long-term local and foreign currency ratings at ‘AA’ and Short-term foreign currency rating at ‘F1+'. The Outlook is Stable.
The ratings reflect APETRA’s status as a limited liability company, which implies that APETRA is not subject to bankruptcy or liquidation proceedings. They are also underpinned by the implicit state guarantee due to its strategic importance for Belgium (‘AA’/Stable/‘F1+') in regards of the company’s public service role
Even if APETRA is financially autonomous, dividend distribution to the sole shareholder (Belgian state) is not possible. APETRA’s budget is not consolidated within the state’s debt. In case of dissolution the assets and liabilities of APETRA would be transferred to the state or another public entity. APETRA does not enjoy formal state support, however Fitch estimates that government intervention would be rapid due to its strategic role and the tight monitoring by the state of its finances.
As a company with a public service role, APETRA is subject to state control. The chairman of the board of directors, which determines APETRA’s policy and monitors its operations, is appointed by the minister of energy. The commissioner of the government ensures the law is upheld and administers APETRA’s statutes and management contract for the state.
The European directive requires each member state to hold strategic oil stocks to cope with the risks of supply disruptions. APETRA is the exclusive manager of this obligation for Belgium. Fitch estimates that APETRA’s monopoly position will not be changed in the medium term.
Even though APETRA does not aim to make profits, it recorded a net profit of EUR126.5m in 2012 (2011: EUR122.1m). In accordance with its status, this is incorporated into reserves. Fitch estimates that net profit should stabilise at around EUR70m in the medium term, given that the financial profit is mainly provided by the levy it receives for its public service role (95% of operating expenditure).
At end-2012, debt reached EUR1.3bn and represented 9.4 years of cash generated. After issuing a bond of EUR300m in 2012 (with a maturity of 8 years), APETRA aims to issue an additional bond amounting to EUR400m in 2013, further expanding the maturity profile. Moreover, for debt management reasons and to achieve a favourable interest rate, APETRA will set up a bridging loan which will be reimbursed by the bond. As the purchase programme is largely completed, the outstanding debt would reach a peak in 2013 (EUR1.6bn) and decrease in the medium term.
Levy is collected on a monthly basis, and is linked to the sales of each oil companies and distributors in Belgium, so cash inflows are stable, but driven by the demand. The proper recovery of this contribution is ensured through a control by the state. Indexed on oil prices, Fitch estimates that the calculation of the contribution allows reducing the price risk associated to the purchase and renewal of stock.
A downgrade could follow a downgrade of the sovereign, an adverse change in the legal framework, which Fitch considers unlikely at present, and a weakening of support expected from the state. Conversely, a positive action on the rating of Belgium would automatically be reflected in the rating of APETRA.
The ratings are based on the following assumptions:
- An intermediate scenario (with a change of two percentage points on average per year of crude oil prices)
- The implementation of the new European directive since 1 January 2013 which implies a slight increase of the level of stock manages by APETRA.
APETRA is sensitive to the level of contribution collected on every litre of petroleum product released for consumption by oil companies and distributors in Belgium. Fitch estimates that the lack of definition of a minimum guaranteed contribution to APETRA in case of lower oil prices reflects a risk in terms of APETRA covering its costs.
The rating actions are as follows:
- Long-term rating: affirmed at ‘AA’; Outlook Stable
- Short-term rating: affirmed at ‘F1+’
- Senior unsecured notes: affirmed at ‘AA’