Most Asian utilities should survive in 2012: S&P
Standard & Poor's Ratings Services revealed on Monday that Asia-based electric, gas, and water utility companies under its rating radar will likely remain broadly stable in 2012, despite economic uncertainties.
Supporting its view are favourable demand for energy, growing populations and economies, companies' strong positions in their respective markets and expanding investment strategies, supportive governments and regulatory frameworks, and easing inflation.
“We take a positive view of the outlook on ratings for utilities in Asia despite the existence of a number of negative factors that affect their operations, including economic headwinds, a slowness to adjust rates under some country's regulatory frameworks, and aggressive investments--which produced a rise in negative rating actions in our portfolio in 2011,” said Standard & Poor’s credit analyst Hiroki Shibata.
The agency also noted that ratings on individual issuers depend on the condition of their financial and competitive positions and whether they benefit from any extraordinary government support, as is the case for government-related entities (GREs).
It also added that sector outlooks by country and subsector are mixed due to several difficulties.
S&P recently lowered GDP forecasts for most Asian countries in 2012 because financial turbulence in Western economies has spilled over into Asia. Demand for electricity in some Asian countries, particularly from the industrial sector, is likely to slow if the global economy enters another recession. In Japan, increasing public opposition to nuclear power continues to weigh on the ratings on Japanese electric utilities.
“We forecast that most of the key financial ratios for these companies will continue to deteriorate through 2012, mainly because of the cost of fuel to replace power from idle nuclear reactors and increasing capital expenditures to enhance safety measures against earthquakes and tsunamis,” Shibata said.
