Enemalta Corporation’s credit rating was untouched yesterday but risked a downgrade unless a special purpose vehicle to finance its debts was set up by year’s end.

The company’s rating was maintained at B+ by rating agency Standard and Poor’s but the outlook was negative.

Enemalta had its credit worthiness reduced by one notch in January, which prompted the Government to pitch in with €25 million and a promise to set up a funding vehicle to refinance the company’s huge debts.

Standard and Poor’s based its decision on the premise that there was “a very high likelihood” the Government would provide “timely and sufficient extraordinary support” in the event of financial distress. Enemalta’s stand-alone credit profile was assessed as being CCC.

The agency said it had expected the refinancing of Enemalta’s debt to be executed in the first half of the year. A law setting up the special purpose vehicle is on Parliament’s agenda.

“We now expect the transaction to be executed by the end of 2012 as any further delay would suggest... that the Government is struggling to address the much-needed financial restructuring of the company,” the agency said.

Enemalta is hounded by a dependence on oil, lack of profitability and high debts. However, S&P gave mixed messages on the price of electricity.

While saying Enemalta’s business risk profile was “vulnerable” because of various factors including the lack of “timely cost-reflective adjustments in the tariffs”, the agency insisted that any move towards a cost reflective tariff posed a risk to the economy.

It said its decision was based on a forecast that Enemalta would post losses of about €60 million this year, which will drop to €35 million after the Government’s commitment to shoulder part of the costs.

ksansone@timesofmalta.com

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