PKN Orlen earned an affirmed BBB- rating from Fitch Ratings, the agency said in a report Wednesday. The rating affirmation reflects PKN Orlen's high risk profile as a pure downstream player and its high dependence on Russian crude supply. Fitch notes, however, that outlook could change from Negative to Stable in the next six to 12 months upon a successful reconstruction of MN refinery after the fire, leading to improved cash flow at the Lithuanian subsidiary; delivery of the group's FY07 financial leverage within the company's target and a sustained favourable medium-term outlook for refining margins," the agency wrote further.
Our view: Fitch lowered the rating of PKN from B+ to BBB- late last year after the acquisition of Mazeikiu Nafta pushed up gearing. Although the rating agency currently maintains its BBB- rating we see a positive momentum of it as the current favourable refining margin environment is very likely to help the company in lowering its gearing and the potential selling of the Polkomtel stake could also reduce indebtedness. We expect slight positive market reaction on the Fitch report which clearly points out the likelihood potential of upgrade in the short to mid term.