OREANDA-NEWS. July 1, 2008. Today, the independent rating agency Credit-Rating announced that it has upgraded the long-term credit rating assigned to Pavlogradugol OJSC (the city of Pavlograd, Dnepropetrovsk Region) to uaBBB from uaB and the long-term credit rating assigned to the company’s registered coupon bonds (series A-Y) to uaBB from uaB. The amount of the bond issue is UAH134.7m, with a 7-year original maturity. The outlooks for both ratings have been revised to stable as UNIAN was informed by the agency.

The company is one of the biggest Ukrainian producers of gaseous type thermal and coking coal. In order to revise the credit rating, Credit-Rating considered the 2007 financial statements of Pavlogradugol OJSC and some other inside information provided by the issuer in the course of the rating process.

An obligor or a debt liability with a uaBBB credit rating is characterized as having sufficient creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is affected by adverse changes in commercial, financial and economic conditions.

An obligor or a debt liability with a uaBB credit rating is characterized as having lower than sufficient creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is strongly affected by adverse changes in commercial, financial and economic conditions.

A stable outlook indicates that there are no anticipated reasons to change the rating in the course of the year.

Factors maintaining the credit ratings are: Pavlogradugol is part of the vertically integrated energy company DTEK, which enjoys a strong market position, having provided 27% of national thermal generation of electricity and 21% of national output of coal in 2007 (with the contribution of Pavlogradugol OJSC to the Group’s total output being 78%); as well as expected growth in the demand for thermal coal.

Factors constraining the credit ratings are: risks of redistribution of intra-group cash flows neglecting the company’s interests; the debt burden (in 2007, the consolidated debt exceeded the EBITDA 3.4 times, with intra-group debt accounting for over 90% of the company’s financial liabilities); volatile performance indicators of the company; the issuer’s bond issue not meeting the standard parameters of interest-bearing bond issuances (this factor only influences the credit rating for the bond issue); DTEK’s dependence upon state regulation in the electricity market.