Standard & Poor's Ratings Services said in Melbourne yesterday that it had affirmed its 'A-' long-term and 'A-2' short-term ratings on NGC and that the ratings had not been affected by NGC's NZ$525 million capital return to shareholders.

"The outlook is stable and the increased debt commitments supporting the NZ$525 million capital return to NGC shareholders are relatively consistent with Standard & Poor's expectations, and should leave the company with sufficient financial flexibility to take advantage of any short to medium-term investment opportunities.

"The capital return to shareholders is to be funded by draw down of NGC's existing bank facilities, and proceeds from the company's NZ$200 million fixed-rate bond issue, which closed on November 28."

S & P said its ratings on NGC reflected the company's strong market position in gas transmission and distribution; diversified revenue base; moderate financial profile; and the support of its major (66%) shareholder The Australian Gas Light Company (A-Stable/A-1).

"These strengths are offset by uncertainty over the changing state of the New Zealand gas market, and uncertainties associated with the current regulatory review of gas transportation."

"The stable outlook on the rating on NGC assumes the availability of sufficient gas supply to NGC in the medium term," said Corporate & Infrastructure Finance Ratings associate director Laurie Conheady.

"The availability of gas supply in New Zealand is heavily dependent on the successful development of existing gas reserves in the near term. The ratings on NGC could come under pressure if the gas reserves position deteriorates from current expectations, leading to a weakening of NGC's gas wholesale and transportation businesses.

Standard & Poor's will continue to monitor the gas supply situation closely," Conheady cautioned.