Moody’s sees stable, viable power sector in PH, Asia Pacific

by Riza T. Olchondra – 12:10 AM December 7th, 2015

from Philippine Daily Inquirer

MOODY’S Investors Service expressed confidence in the viability of the power sector of nine Asia Pacific countries including the Philippines.

The credit rating firm gave a “stable” outlook amid steady power demand, low input costs for most countries, transparent tariff mechanisms for some countries, and strong government support for state-owned power utilities.

This was contained in a report titled “Power Utilities–Asia Pacific ex-Japan 2016 Outlook–Steady Demand, Low Input Costs Drive Stable Outlook, Despite High Capex.”

The outlook was for Asia Pacific (excluding Japan) and covered the Philippines and eight other economies: Australia, China, Hong Kong, Indonesia, South Korea, Malaysia, Singapore and Thailand.

In the report, Moody’s said the outlook was also supported by the power companies’ strong to adequate funding capacity.

Stable or positive outlooks for China, India, Indonesia, Malaysia, New Zealand, Korea and the Philippines mean the ability of the concerned governments to support their state-owned power utilities, if and when needed, will not weaken materially over the next 12 to 18 months, Moody’s said.

For the Philippines, where Moody’s watches state-owned firms Power Sector Assets & Liabilities Management Corp. (PSALM, Baa2 stable) and National Power Corp. (Napocor, Baa2 stable), the rating firm said it was not expecting “material margin erosion” and any major constraints on fuel supply for the issuing firms.

The credit profiles of state-owned power companies such as PSALM and Napocor will also continue to benefit from strong government support, the credit rating firm said.

“State-owned power utilities in China, India, Indonesia, Malaysia, Korea, Singapore and the Philippines will maintain their strategically important positions as dominant/monopolistic utilities and/or implementers of mandated policies over at least the outlook period. As such, we believe the respective governments will provide timely support to the utilities, if their viability is at risk,” Moody’s said.

Progress toward the implementation of consistent cost pass-through mechanisms in some economies will remain slow but Moody’s expects other factors to keep the industry stable.

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