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June 3 (The following statement was released by the rating agency)
Fitch Ratings has affirmed APETRA's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'AA' and its Short-term foreign currency IDR at 'F1+'. The Outlook is Stable. Its senior unsecured notes have also been affirmed at 'AA'.
Fitch classifies APETRA as a dependent public sector entity (PSE) under its rating of public sector entities criteria, due to the consolidation of its debt into general government accounts, strong oversight from the government and its strategic role in government policy through ensuring the security of oil supplies for Belgium. As a result the ratings and Outlook of APETRA are equalised with Belgium's ratings (AA/Stable/F1+).
KEY RATING DRIVERS
As a wholly owned entity by the State, in case of dissolution the assets and liabilities of APETRA would be transferred to the State or another public entity. Although APETRA is financially autonomous, dividend distributions to its sole shareholder, the Belgian State, are not possible because of its public service role. All net profits are incorporated into APETRA's reserves.
The European Directive 2009/119/EC requires each member state to hold strategic oil stocks to cope with the risk of supply disruptions. APETRA is the exclusive manager of this obligation for Belgium. In 2013, as requested by Eurostat, APETRA - as with some state-owned enterprises - have been consolidated into the general government accounts. Fitch assumes that the Belgium State is highly motivated to provide support, in case of need, to APETRA and that it has the legal and financial means to enable APETRA to meet debt-service obligations on a timely basis.
Given APETRA's public service role, the Belgium State exerts strong administrative, legal and financial oversight over the company. Following its consolidation into general government accounts, this supervision has been reinforced through the State's approval of APETRA's annual budget in addition of the multi-year plan. On a quarterly basis, APETRA presents to the State its debt levels and the value of its stocks.
In 2013, due to a correction of the calculation method, APETRA's required oil stocks have diminished in absolute value, leaving it with stocks surplus to requirements. This would allow it to sell some purchase rights of finished petroleum products at market prices (tickets) in the medium term. Fitch estimates that cash flow should stabilise at around EUR100m in the medium term.
At end-2013, debt reached EUR1.7bn and represented 15.4 years of cash generated by APETRA. APETRA plans to repay some of its debt using its strong available cash resources (EUR200m at end-2013) and net cash flow generation over the medium term. Despite some exit fees, Fitch estimates that repayment would improve the debt's profile of APETRA with debt of EUR860m by end-2019.
APETRA's levy is collected on a monthly basis, and is linked to the sales of each oil company and distributor in Belgium, resulting in stable cash inflows.
Such collections are enforced through state control. Indexed to oil prices, Fitch estimates that the calculation of the contribution allows for a reduction in the price risk associated with the purchase and renewal of stock.
A downgrade could follow a similar rating action on the sovereign, an adverse change in the legal framework - which Fitch considers unlikely at present - and a weakening of expected support from the State.
Conversely, a positive action on the rating of Belgium would automatically be reflected in the ratings of APETRA.