The ratings on Austria-based utility KELAG AG reflect the company's sound business profile, owing to its strong local position in electricity supply and its natural monopoly on regional electricity distribution in the Austrian state of Carinthia. These strengths are offset by the company's small size, its operation in a fully liberalized energy market, a more aggressive expansion strategy, and regulatory pressure from the incentive-based regime that is used to set network tariffs. KELAG is a vertically integrated utility that distributes and supplies electricity, gas, and heat. About 84% of its €745 million turnover came from the electricity sector and 8% from the heat business in 2006. The company can generate more than 900 megawatts (MW) of hydropower; this capacity includes
