The ratings on KELAG AG reflect low business risks from its strong market position as the Austrian province of Carinthia's public supply utility, with favorable regulation and operations and a robust financial profile. These strengths are partly offset by Carinthia's varying growth record, and some uncertainty about the ultimate impact of electricity market reform. KELAG, 64% owned by Carinthia and 35% by Verbundgesellschaft (Oesterreichische Elektrizitaetswirtschafts Aktiengesellschaft), is a vertically integrated utility, with regional monopolies in the distribution and supply of electricity, gas, and heat, and 928MW of own generation capacity. Electricity accounts for about 90% of sales. KELAG has historically benefited from a benign regulatory environment and moderate market liberalization. The country's new government has however recently accelerated market liberalization
