June 2, 2017 / 10:32 AM / 2 months ago

Fitch Affirms APETRA at 'AA-'; Outlook Stable

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(The following statement was released by the rating agency) PARIS, June 02 (Fitch) Fitch Ratings has affirmed APETRA's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'AA-' with Stable Outlook and Short-Term Foreign Currency IDR at 'F1+'. Its senior unsecured notes have also been affirmed at 'AA-'. Fitch classifies APETRA as a credit-linked entity under its public-sector entity rating criteria, due to the consolidation of its debt into general government accounts, strong oversight by the government and its strategic role in government policy through ensuring the security of oil supplies for Belgium. As a result, APETRA's ratings are equalised with those of, and credit-linked to, Belgium (AA-/Stable/F1+). KEY RATING DRIVERS Legal Status (Stronger) APETRA is a limited liability company governed by public law and, as such, is not subject to bankruptcy risk. As a wholly state-owned entity - its capital can only be owned by the federal state - APETRA's assets and liabilities would revert to the state or another public entity in case of dissolution. Although APETRA is financially autonomous, dividend distributions to its sole shareholder, the Belgian state, are not possible because of its by-laws and public service role. Strategic Importance (Stronger) Oil is crucial for the domestic energy supply, representing the first source of energy consumed in Belgium. A European Directive requires each EU member state to hold strategic oil stocks. APETRA is the exclusive manager of this obligation for Belgium. The federal state, through its Ministry of Energy, sets quarterly the level of the contribution paid by oil companies to APETRA, which must, by law, cover APETRA's operating expenditure. Fitch believes that the Belgian state is highly motivated to provide support, and that it has the legal and financial means to enable APETRA to meet its debt service obligations on a timely basis, as highlighted by the EUR35 million exceptional subsidy granted in 2016. Control (Stronger) Given APETRA's public service role and the entity's consolidation into the general government accounts, the state exercises strong administrative, legal and financial oversight. The state approves APETRA's annual budget in addition to its multi-year plan. APETRA reports its debt levels and the value of its stocks to the state on a quarterly basis. Integration (Stronger) Relations between APETRA and the state are codified by law, by-laws, and a management contract. APETRA's debt is included in the general government's debt of Belgium as required by Eurostat. Even though its debt does not benefit from an explicit guarantee from the state, it benefits from direct access to the Belgium debt agency, which significantly mitigates its refinancing risk. In 2017, APETRA's stockholding obligation (compulsory strategic oil reserves) decreased 36% as compared with 2016 to 3.5 million tons due to an improvement in the naphta yield, which enters into the stockholding obligation formula. As of end-March 2017, APETRA's stockholding obligation was covered by the entity's oil stocks. The risk of refinancing is limited by APETRA's access to the Belgium debt agency, which will allow the entity to refinance debt at the respective maturity date. Despite a reduction in its oil stock requirements for 2017, APETRA's outstanding debt (incl. debt owed to the Belgium debt agency) is expected to remain stable in the medium term. 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. The collections are enforced through state control. RATING SENSITIVITIES A downgrade could follow a similar rating action on the sovereign, an adverse change in the legal framework - which Fitch views as unlikely at present - and a weakening of expected support from the state. Conversely, positive rating action on Belgium would automatically be reflected in APETRA's ratings. Contact: Primary Analyst Nicolas Miloikovitch Analyst +33 1 44 29 91 89 Fitch France S.A.S. 60, rue de Monceau 75008 Paris Secondary Analyst Arnaud Dura Director +33 1 44 29 91 79 Committee Chairperson Guilhem Costes Senior Director +34 93 323 8410 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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