Moody's downgrades Teplarna

Moody's Investors Service said it downgraded the long-term national scale rating of Teplarna Strakonice to Aa3.cz from Aa2.cz. Teplarna Strakonice is 77.3% owned by the City of Strakonice.

The outlook is stable.

The agency said the downgrade reflects the challenges to Teplarna Strakonice's standalone credit quality from the expected lower performance in 2010, particularly a double-digit-percentage decrease in revenues from electricity produced in cogeneration given the unprecedented decrease in electricity prices.

The rating action also takes into account the company's plans to undertake a considerable modernization of its two heating generators, which would incur approximately CZK 500 million of capital expenditure. Moody's said the company's ability to realize its ambitious capex plans will generally depend on its success in negotiating long-term funding.

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