Moody's maintains stable outlook for Asian power utilities

KUALA LUMPUR: Asia's power utilities sector, excluding Japan, is expected to remain stable for the next 12 to 18 months due to favourable regulatory environment and governmental support.

In its report released in Hong Kong recently, Moody's Investors Service maintained its stable outlook for the Asian power utilities sector.

This was underpinned by its expectations that the favourable regulatory environment will remain intact as stable power supply is becoming increasingly important to sustain economic growth in the region.

Moody's vice president and senior analyst Mic Kang, however, said excessive capital expenditure (capex) and overseas investments, or a further delay in cost recovery would adversely affect the sector's outlook by adding pressure on the credit metrics of the power utilities.

"High capex and investments will continue to weigh on key credit metrics.

"However, most Asian utilities have some headroom before a negative rating action becomes necessary, given the likelihood of supportive measures by the government and the increasing operating cash flows from new power plants and investments," he said.

Kang was speaking at the release of a report entitled "Increasing credit pressures but still manageable", which discusses key issues such as rising capex and investments, fuel price pressure, fuel supply risk as well as the rating implications for the Asian power utilities sector.

The report said the power utilities have some flexibility to adjust their capex and investment plans depending on the prevailing market conditions and their financial status.

In addition, the pressure on government-owned integrated utilities from high fuel prices is likely to be partially offset by measures, such as ad-hoc tariff increases and subsidies.

However, these measures will be subject to the prevailing economic conditions and fiscal budgets of the respective governments, it noted.

Moody's expects fuel shortages in Malaysia to be gradually resolved by the government's initiative to improve the efficiency of gas supply.