The ratings on the Dutch energy distribution group, Eneco Holding N.V. and its subsidiary ENECO N.V. (collectively ENECO Energie), reflect stable operating cash flows from the group's monopoly energy distribution businesses and conservative financial policy. These strengths are offset, however, by increasing competitive pressure and the potential exposure of cash flow to volatile wholesale electricity prices. ENECO Energie faces strategic challenges given its market size compared with its peers, limited generation capacity to meet customer demand, and full opening of the Dutch electricity market to competition on July 1, 2004. Its retail margins are expected to fall following the liberalization of the market. Furthermore, market volatility could cause a mismatch between purchase and sale prices. ENECO Energie's risk management and
