The ratings on Austria-based utility KELAG AG reflect the company's satisfactory business risk profile, owing to its favorable low-cost hydrobased generation fleet; its natural monopoly on regulated regional electricity, heat and gas distribution; dominant position in electricity supply in the Austrian State of Carinthia; and modest financial risk profile. These strengths are offset by the fully liberalized energy market, the company's relatively small size, short-term maturity profile, exposure to volatile electricity prices, and its intention to implement a more aggressive medium- to long-term expansion strategy. KELAG is a vertically integrated utility that supplies and distributes electricity, gas, and heat. About 87% of its 2007 turnover came from the electricity sector and 13% from the heat and gas business. The company's
