The ratings on Austria-based utility KELAG reflect Standard&Poor's Ratings Services' view of the company's strong market position in the State of Carinthia (not rated), where it is the dominant supplier of electricity. The ratings also reflect KELAG's stable and predictable cash flows from its monopoly regional distribution activities in electricity, gas, and heat, which account for about 20% of its earnings; its favorable low-cost, hydro-based generation activities, which supply about 55% of its own power needs; and its solid financial profile. These strengths are partly offset by KELAG's exposure to volatile wholesale power prices in the liberalized Austrian energy market. This reflects the fact that about 50% of KELAG's operating profits have historically come from generation. The company
