Bangkok--16 Feb--Fitch Ratings
Fitch Ratings has said today that the 2009 credit outlook for the Asia-Pacific Power and Utilities sector is broadly stable, although some countries and companies face negative credit trends.
"The economic slowdown may ease the capex burden in the region's fastest growing economies," notes Steve Durose, head of Fitch's Asia-Pacific Energy & Utilities team. "Asia-Pacific utility companies are generally well-placed to access funds during the credit crunch because of the relative stability of their cash flows and, in many cases, close links to governments," adds Mr. Durose.
In its special report, "Asia-Pacific Power and Utilities: Credit Outlook 2009", Fitch provides a credit overview for the sector in each country in the region where it has ratings.
Some factors are generally common across all countries: the businesses are capital intensive; capex is generally rising; there is often a correlation between local fuel costs and international fuel costs; and demand is broadly related to economic growth. However, factors such as the level of government ownership/intervention, the difference in exposure to competition or the forms of tariff regulation are so different across the region that the Power and Utilities sector within each country tends to have its own credit momentum.
Many utilities' margins were squeezed in 2008 as fuel costs rose and some governments did not allow the companies to pass on this additional cost. The bursting of the oil and gas price bubble and the global economic slowdown will lead to lower fuel costs and higher margins in 2009, although this is unlikely to result in positive credit momentum, as Fitch rates through the cycle and generally did not downgrade based on weakness in 2008.
With the tightness of credit markets and the significant widening of spreads, Fitch believes that the risk of debt-funded M&A is lower than it has been for many years.
Most Asia-Pacific Power and Utility companies rated by Fitch have Stable Outlooks. The principal exception is the Korean sector where the Outlooks are Negative. In Fitch's view the links between these majority-government-owned companies and the Sovereign are so strong that the agency rates these businesses by notching down from the sovereign. Therefore these companies' Negative Outlooks reflect the Outlook on the Korean Sovereign.
The report is currently available from www.fitchratings.com.
Contacts: Steve Durose, Sydney. +61 2 8256 0307/ [email protected]; Simon Wong, Singapore, +65 6796 7235/ [email protected].
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.