Fitch Ratings has today said that the 2010 credit outlook for the Asia-Pacific Power and Utilities sector is broadly stable, although some countries and companies face negative credit trends.
"Asia-Pacific utilities' credit quality remained broadly stable during the economic slowdown caused by the global financial crisis," notes Steve Durose, head of Fitch's Asia-Pacific Energy & Utilities team. "However, the increase in fuel costs may place some pressure on margins, and a return to robust electricity demand growth may accelerate the industry's capex requirements," adds Mr. Durose.
In its special report entitled "Asia-Pacific Power and Utilities Credit Outlook 2010", Fitch provides a credit overview for the sector in each country in the region where it has ratings.
Broadly speaking, utilities' margins improved in 2009 as the global financial crisis caused primary fuel costs to fall significantly from 2008's record levels. If fuel costs rise above their current level for a sustained period and governments or price regulators do not allow customers to bear the full cost impact, companies are likely to face margin compression, as happened in 2008.
The slowdown in economic growth in the last two years provided some developing countries with some respite from the desperate need to increase electricity generation capacity and infrastructure. However, as economic growth starts to improve, capacity shortages will become more acute and investment programmes may have to be accelerated. Even countries which are not facing serious electricity shortages generally have significant capital expenditure programmes to improve security of supply, replace aging infrastructure, or to invest in greener generation to meet carbon policy objectives.
However, even taking tariff and capex risks into account, almost all Asia-Pacific Power and Utility companies rated by Fitch have Stable Outlooks, as the agency has already incorporated these risks into its ratings. In addition, many of the companies have very close links to governments which provides significant liquidity benefits. However, if margins decline or debt-funded capex increase beyond Fitch's current expectations, then the agency may take negative rating actions.
The report also shows which Asia-Pacific Energy and Utility companies have high, medium or low headroom in their ratings.
Sunday, February 7, 2010
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