By Park Jin-hai
Moody's Investors Service has upgraded the issuer and senior unsecured ratings of Korea Electric Power Corp. (KEPCO) and its six wholly-owned power generation subsidiaries to “Aa3” from “A1.”
"The rating upgrade reflects KEPCO's improving operating performance and the Korean government's strengthened oversight of the company's financial health, as evidenced by its mid-to-long-term public institution financial management plans," says Mic Kang, a Moody's vice president and senior analyst.
These positive developments mean that KEPCO is appropriately positioned at the Aa3 rating, when compared with global and regional government-related issuers (GRI) with similar baseline credit assessments (BCA) and levels of government support under Moody's joint default analysis approach.
The rating upgrade for the six units follows KEPCO's upgrade, given their 100 percent ownership by and operational integration with KEPCO.
“Moody's expects that KEPCO on a consolidated basis will record solid profits and operating cash flows over the next 12-18 months, because of the commissioning of new coal and nuclear power plants, and lower input costs,” it said.
The latter will stem from likely stable-to-declining fuel prices and a strong Korean won, it said.
KEPCO's financial profile should also further benefit from the rationalization of its capital expenditure/investments, sales of non-core assets, and cost reduction initiatives, it said.