S&P raises Psalm outlook to ‘positive’

By Jordeene Sheex Lagare – April 30, 2018
from The Manila Times

Standard & Poor’s (S&P) Global Ratings has retained state-owned Power Sector Assets and Liabilities Management Corp.’s (Psalm) “BBB” credit rating and revised its outlook from “stable” to “positive,” mirroring that of the Philippines.

In a statement last Friday, the credit rating agency said the revised outlook reflected its view that improvements in the country’s “policymaking settings could support a track record of more sustainable public finances and balanced growth over the next 24 months.”

The move was based on the “almost certain likelihood” that the government will support the implementation of reforms to liberalize the country’s power industry and on the link between the company and the government that “provides an irrevocable, unconditional, and timely guarantee on all of the company’s debts,” it added.

This likelihood is the reason it has not assigned a stand-alone credit profile to Psalm, S&P said.

“In addition, we do not believe government support is subject to transition risk. We believe Psalm executes strategic government policies for power-sector reforms and it is difficult to differentiate Psalm from the Philippine government,” it added.

If a country’s sovereign rating is changed, so will the firm’s, according to S&P.

“The outlook also reflects our assessment that, given Psalm’s strategic importance to the Philippine government, there will be no significant changes to extraordinary government support for the company, guarantees or operational framework,” the agency said.

“We will revise the outlook to ‘stable’ if we take the same rating action on the sovereign, or if we believe government support for Psalm is weakening,” it added.

“A change in law, privatization plans, or the refusal of future guarantees could lead us to reassess the company’s role to the government,” S&P said.

“However, we believe these developments are highly unlikely,” it added.