Bangkok--Jan 17--Moody's Investors Service
Moody's Investors Service
- in a new report
- says that the outlook for the Asian power utilities sector will remain
stable in the next 12 months.
The stability of credit profiles for companies in the sector is, in turn, backed by the region's sustainable growth in electricity consumption,
supportive regulatory environments and the utilities' steady financial profiles, the report says. Such factors offset concerns over fuel price increases, large capex requirements, and the risk of overseas expansion.
Furthermore, the financial profiles of most utilities in Asia remain sound and compare favorably to their global investment grade peers, Moody's says.
The report is entitled, Asia Power Utilities Sector Outlook: Stable as
Steady Financial Profiles Offset Fuel Price Rises, and is authored by Gary Lau, a Moody's Senior Vice President. It covers utilities rated by Moody's in Hong Kong, India, Korea, Malaysia, the Philippines, Singapore and Thailand.
State-owned fully integrated power utilities dominate Asia's power
utilities sector, the report says. Most of these companies' ratings will remain closely linked to their respective sovereign ratings because of their strategic importance to their domestic economies, majority state ownership and the resultant explicit or implicit government support.
The report says that Moody's does not expect any significant developments
in the near term because deregulation and liberalization remain slow throughout the region and developments during the past 12 months suggest that governments are cautious over opening up their markets.
Securing a reliable and stable power supply remains the primary policy
objective for regulators, while limited investor interest has further delayed privatization.
In the absence of any increase in tariffs or automatic cost-pass-through
mechanisms, sustained growth in demand remains one of the major drivers for revenue and cash flow growth, partially offsetting the negative impact of surging fuel costs.
"Given the historically strong growth in electricity demand, low per
capita consumption and improvements in economic conditions, the region will be able to sustain demand growth to support the sector's operating performance," the report points out.
However, the sector's financial profiles will potentially come under
pressure if fuel prices continue to rise and remain at high levels over a prolonged period without tariff adjustments to allow for cost pass through, the report says.
Furthermore, it is cautious about overseas expansion, a trend of recent
years, pointing out: "Moody's is cautious that an aggressive expansion strategy into more competitive and uncertain regulatory environments could raise overall business risk profiles and pressure ratings over the medium term."
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Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
612 9270 8100
Hong Kong
Gary Lau
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
Telephone: 852-2509-0200
Facsimile: 852-2509-0165 End.