OREANDA-NEWS. Fitch Ratings has affirmed Regie Autonome des Transports Parisiens' (EPIC RATP) Long-term Issuer Default Rating (IDR) at 'AA' and its Short-term IDR at 'F1+'. The Outlook on the Long-term IDR is Stable. RATP's EUR5bn euro medium-term programme has been affirmed at 'AA' and 'F1+' and its EUR2bn commercial paper programme at 'F1+'.

KEY RATING DRIVERS
Fitch rates industrial and commercial public establishment (EPIC) RATP on a top-down basis as it is classified as a credit-link entity under the agency's public-sector entity criteria. This is due to our expectations of strong state support in case of need for an EPIC, tight control by its sponsor (France; AA/Stable/F1+), and its strategic importance to the state. Fitch rates only the EPIC component of RATP and not the whole RATP group.

The French government does not explicitly guarantee RATP's debt, but Fitch assumes that the state would be willing to provide timely support in case of need. By virtue of its status, an EPIC's assets and liabilities cannot be liquidated or transferred to entities other than the French state.

The state owns 100% of EPIC RATP, sets its strategy through the nomination of its Chairman and an engagement letter that contains RATP's main priorities. Fitch estimates that about 90% of the RATP's revenues are highly dependent on the decisions of the Supervising Transport Authority for Ile-de-France (STIF), for which RATP carries out the public transport service, under a four-year contract, which has been renewed from 2016 for a duration of five years.

RATP carries out an essential public service as requested by the STIF. EPIC is legally designated as owner and infrastructure manager (GI) of urban transport in Paris, for the regional express network and metro. A timetable has been set for the opening up to competition of transport operations (OT). As of end-2014, almost all the rated issues will mature before the first dates for opening up to competition.

Under its 2020 business strategy and due to the combined effect of productivity and an increase in subsidiary contributions, Fitch expects the RATP group's cash flow to remain sound at EUR0.9bn in 2020, compared with EUR0.5bn at end-June 2015 (despite payment of corporate tax from January 2016). Fitch estimates a net result of EUR376m for 2015, which would be higher than expected in the budget, despite a slight decline of turnover.

Despite a high total investment of EUR8.6bn over 2016-2020, Fitch expect RATP's debt to stabilise until 2020, due to an expected improvement of budgetary performance and STIF's funding. Due to the monopoly on its business, Fitch expects GI's gearing to reach 1.5x in 2020 (2014: 2.0x) while the gearing of OT - which will be subject to competition - will only reach 0.7x (2014: 1.0x).

RATP has a EUR2bn domestic commercial paper programme without any backup lines. This is only possible because the EPIC status means it can gain access to funding through the Debt Public Fund in a liquidity crisis. RATP can also access state emergency financial support mechanisms.

RATING SENSITIVITIES
RATP's ratings are credit-linked to those of the sovereign. A positive or negative rating action on the sovereign would result in a similar rating action on the issuer. Changes to RATP's legal status that weaken potential support from the state could lead to a downgrade.