Fitch: Elektrownia Turow on watch

Fitch Ratings said it is maintaining Elektrownia Turow SA's senior secured B- rating on Rating Watch negative.

This follows a review of recent developments and applies to the company's debt secured by power purchase agreement-backed revenues, including Elektrownia Turow BV's €270 million guaranteed secured bonds maturing in 2011.

Fitch noted the rating was downgraded from BB on Sept. 12, 2003 to reflect the increasing probability that the company's PPA will be unilaterally cancelled as part of the restructuring of the Polish power sector, potentially triggering an event of default and/or forcing financial restructuring.

Although changes have been made to the draft act that will govern restructuring, its essential principles and the key risks to the PPA-secured creditors addressed earlier by Fitch, i.e. the possibility of partial non-cash compensation, delayed compensation for some units and de-facto seniority of government-guaranteed debt in compensation arrangements, remain in place.

While the government approved the draft in January 2004 and submitted it to parliament in February 2004, the plan to approve it in April 2004 does not seem to be realistic now as the first parliamentary reading has been cancelled and no new date has been set, the agency said. Furthermore, the EU has not yet approved the plan.

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