RPT-Fitch publishes primer on Finnish not-for-profit power gencos
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Dec 12 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings describes in a new report how, in rating a Mankala electricity generator, a specific form of Finnish cooperative, the agency applies its rating approach for utilities operating in a commercial environment together with that for corporate cooperatives.
Fitch analyses the parent and subsidiary relationship of Mankala companies by evaluating the stability and diversification of the shareholder base, the value creation for shareholders through the purchase of electricity at a lower cost than the market price and the extent to which fixed and variable costs are covered by shareholders, including debt instalments.
A further rating consideration for Mankala companies with large investment projects in the construction phase is prudent debt and liquidity management. This is because the project under construction does not receive cost coverage by the shareholders until production begins, meaning a large emphasis is placed on refinancing risk and adequate liquidity.
Mankala companies' cash flows are not directly comparable with other ordinary corporations given their not-for-profit principle. Therefore in one of several scenarios analysed in the rating process, Fitch calculates EBITDA and credit ratios hypothetically on a profit-making scenario, assuming that a Mankala company is able to sell its electricity output at higher market prices into the Nord Pool instead of at-cost prices.
Other considerations that form part of Fitch's analysis also include whether the asset is of national strategic importance, the absence of volume and price risk and the completion risk of large capital projects such as Olkiluoto 3. The report 'Analytical Features of Finnish Not-For-Profit Electricity Generators' is available on www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: Analytical Features of Finnish Not-for-Profit Electricity Generators
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