Two major credit rating agencies have drawn attention to Bord Gáis's strained financial profile and risks linked to its €1.3 billion capital programme.

Moody's and Standard & Poor's (S&P) assigned "stable" ratings to the State gas company, which is seeking to raise a €500 million bond to part-fund two major infrastructure projects.

The company is building a new interconnector to transport gas into the State from Scotland and it is extending the national gas network to Limerick from Dublin via Galway.

Analysts at Moody's yesterday assigned a Baa1 long-term issuer rating to the company and a Prime-2 short-term rating. On Monday, S&P assigned an A-minus long-term rating and an A2 short-term rating to the company. Both described Bord Gáis as strong but the ratings stopped short of the highest available.

The Moody's long-term rating implies a Bord Gáis bond would be considered "neither highly protected nor poorly secured" at the higher end of the category.

While the comparable S&P rating considers the company's capacity to meet its obligations strong, it was "somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions" than higher categories.

Bord Gáis chief executive Mr Gerry Walsh said it was "delighted" with the stable ratings.

Moody's said the regulatory environment was generally favourable while citing the company's stable and predictable cashflows, an implied support from the Government, and the expectation of lower capital expenditure.

But it also said: "The ratings also take into account Bord Gáis's strained financial profile over the medium term as a result of its significant capital expenditure programme, the reduced financial flexibility offered to the company by its banking facilities' financial covenants during the main capital expenditure programme, uncertainty over the company's future ownership and State participation, the increasing competition in the liberalising Irish gas market and Bord Gáis's modest size and relatively small number of assets."

The agency added: "Moody's recognises that Bord Gáis's management face challenges in the near term. . . Although management has historically proved their ability to efficiently manage project construction, the current programme is of a significantly larger size and scale."

S&P said Bord Gáis's strengths were offset by "significant risks" surrounding the capital programme. "Bord Gáis will be exposed to the significant risks inherent in a large capital expenditure programme that will effectively double the size of the company's asset base. The increased financial risk associated with the debt funding of this investment will lead to a 140 per cent increase in the company's debt to about €1.34 billion by fiscal 2003. In addition, gearing will increase to about 60 per cent from 43 per cent in fiscal 2001 and, from operations, interest coverage will deteriorate to just under three times from 8.6 in fiscal 2001 before both ratios improve in later years."

Bord Gáis was comfortable that its gearing could be sustained given strong cash flows and profitability, Mr Walsh said.