The ratings on United Waterworks are based on the consolidated credit quality of its ultimate parent, Suez S.A. (A-/Stable/A-2), in conjunction with the company's above-average business and financial position. The ratings on Suez reflect its diversified business profile and resilient cash flows, as well as the strong market position of its European energy, water, and waste activities through 50%-owned Electrabel, Ondeo, and Sita, respectively. The company's refocused strategy, which limits higher-risk international activities, and commitment to continued improvement in credit metrics including positive discretionary cash flow by 2005 also support the ratings. These strengths are somewhat offset by a moderate, though significantly improved, financial structure and exposure to higher-risk international operations, as well as lower-margin service and engineering activities. The
