Bangkok--27 Mar--Moody's Investors Service A growing number of debt-funded acquisitions combined with heavy capex requirements among rated utilities companies have played key roles in Moody's Investors Service's negative outlook for the Asian utilities sector over the next 12-18 months, says a newly-released report from the rating agency. The report also cites margin pressure on issuers from higher fuel costs and the lack of automatic mechanisms for passing on rising costs to end users as additional explanations for the outlook. "These pressures have been the main reasons for our taking negative rating actions with respect to 6 of Asia's 18 rated power utilities in the past 12 months," says Jennifer Wong, the report's co-author and a Moody's analyst. "However, Moody's does not expect additional, dramatic rating changes because the sector continues to show a number of supporting factors," says Wong. These supporting factors include strong levels of government ownership, supportive regulatory environments, protected market positions, sustainable growth in electricity demand, and a commitment to improving operating efficiencies, says the report. It also states that many rated issuers exhibit strong financial profiles with most Asian power utilities facing only limited refinancing risk, even in the current tightening credit environment. "The sector's relatively good corporate liquidity stems partly from strong governmental support and ownership, which facilitate the utilities' access to domestic and international capital markets," saysKen Chan, a Moody's analyst and co-author of the report. He adds, "The financial profiles of Asian utilities compare well against those of their global investment-grade peers. Although utilities in the US typically operate in more transparent and tested regulatory environments, Asian utilities have stronger credit ratios, supported bysustainable growth in electricity demand." Sectoral reform in Asia has occurred only gradually though it has shown some progress over the past 12 months. Nevertheless, the rated utilities will continue to command dominant positions in their industries, not least because in order to ensure stable supplies, regulators have implemented reforms prudently and thereby minimized any negative impact on the utilities' credit profiles. The report, entitled, "Asian Power Utilities Sector Outlook", is available at www.moodys.com. Hong Kong Ken Chan Asst Vice President - Analyst Corporate Finance Group Moody's Asia Pacific Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (852) 3551-3077 Hong Kong Gary Lau Senior Vice President Corporate Finance Group Moody's Asia Pacific Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (852) 3551-3077