OREANDA-NEWS. December 14, 2015. Fitch Ratings says in a presentation that it has revised its sector outlook for central European (CE) utilities to negative from stable.

The Rating Outlook for CE utilities remains Stable, reflecting the Stable Rating Outlooks on 80% of companies rated in the region. Most CE utilities rated by Fitch have sufficient headroom within their respective ratings, and debt capacity to fund their capex programmes. However, higher than expected capex or large-debt funded acquisitions could put pressure on some ratings.

The revision of the sector outlook to negative reflects projected deterioration in cash flows in fossil-fuel and nuclear-power generation. This is driven by lower forward wholesale electricity prices for 2016 compared with 2015, a rising share of renewables supported by subsidies and, in the case of fossil-fuel generation, also declining free CO2 allowances and rising CO2 prices. Lignite-fired power plants will also be under increased cash-flow pressure from low hard-coal prices.

An additional risk for Polish utilities' ratings is the financially stressed state of domestic coal mining. If the government decides on a broader consolidation of Polish state-controlled utilities with coal mining, this would put downward pressure on the utilities' ratings. Furthermore, Polish utilities will be negatively affected by the regulatory office's recent decision to substantially reduce weighted average cost of capital for electricity distribution networks for 2016.

The presentation, entitled "Central European Utilities: Negative Sector Outlook ", is available at www.fitchratings.com or by clicking the link above. Additional information is available in the section on CE utilities in "2016 Outlook: EMEA Utilities" published on 8 December.