Agence France Presse

Singapore, January 17:

The outlook for Asian power utilities will remain stable in the next 12 months despite recent fuel price increases, Moody’s Investors Service said on Monday.

Sustainable growth in consumption, supportive regulatory environments and utilities’

steady financial profiles were offsetting concerns over fuel prices, large capital requirements and risks linked to overseas expansion, it said.

“Furthermore, most utilities’ financial profiles remain sound and compare favourably to their global investment grade peers,” the credit rating agency said in a special commentary on the power sector.

Moody’s said it did not expect any significant developments in deregulation and liberalization in the near term, with governments wary of opening up their markets and regulators focused on ensuring stable power supply.

“The exception will be the Philippines which will likely push for the privatization of its generation and transmission assets to raise the funding needed to cover the huge deficit of its loss-making state-owned utility, National Power Corp.,” it said.

The Moody’s commentary covered utilities in Hong Kong, India, South Korea, Malaysia, the Philippines, Singapore and Thailand. The Philippine utility got the lowest rating at Ba2 with a negative outlook for both foreign and local currency debt. The rest were rated higher and were either stable or positive in outlook.

The Electricity Generating Authority of Thailand (EGAT) received an A1 rating and stable outlook for foreign currency debt, CLP Holdings Ltd. in Hong Kong got A1/stable, and Tenaga Nasional in Malaysia Baa2/stable.

While the sector’s prospects remained generally stable, Moody’s said tariff-setting mechanisms remained opaque in certain countries, making them highly dependent on electricity demand for revenue and cash-flow growth.

Financial profiles would come under pressure if fuel prices continued to rise and remained high for a prolonged period without tariff adjustments “to allow for cost pass through” to

consumers, Moody’s said. Utilities were also exposed to adverse currency movements, while revenues were largely generated in local currency.

“The risk is partially mitigated by the sector’s efforts to reduce foreign currency debt. We draw additional comfort from their ability to access domestic and international bank and capital markets,” it said.

Moody’s cautioned 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.”