Namdong Power Granted Moody's 'Aa2' and S&P 'AA' Ratings on USD Bonds

The person on the right is Yoo Hyang-yeol, President of Korea South-East Power.

[Asia Economy Reporter Moon Chaeseok] On the 21st, international credit rating agency Moody's announced that it has assigned an 'Aa2' credit rating to the senior unsecured bonds denominated in US dollars to be issued by Korea South-East Power Co., Ltd.

Mic Kang, Vice President and Senior Analyst at Moody's, explained, "The assigned Aa2 credit rating reflects the close relationship between Korea South-East Power and its parent company Korea Electric Power Corporation (KEPCO) in terms of business and financial aspects, as well as the strategic importance of Korea South-East Power as a major domestic power producer in the Korean economy."

Moody's judged that Korea Electric Power Corporation (Aa2, stable) and the Korean government (Aa2, stable) would take strong measures if necessary to prevent extensive and significant disruptions to the operations of the six power subsidiaries, including Korea South-East Power. Accordingly, Korea South-East Power's credit rating was rated seven notches higher than its standalone credit profile.

Moody's expected Korea South-East Power's Funds From Operations (FFO) to adjusted debt ratio to have recorded 12-15% as of last year and to maintain a similar level over the next 12 to 18 months. Unless Korea South-East Power's credit metrics improve significantly, the possibility of a meaningful improvement in the company's standalone credit profile over the next 12 to 18 months is low. Moody's anticipated that the standalone credit profile would improve only if the FFO to adjusted debt ratio consistently remains at around 20%.

S&P also assigned an 'AA' long-term bond rating to the US dollar-denominated senior unsecured bonds that Korea South-East Power (AA, stable) is preparing to issue.

S&P assigned the same rating to the senior unsecured bonds as the issuer credit rating. According to S&P, as of the end of September last year, Korea South-East Power's standalone unsecured borrowings amounted to approximately KRW 3.2 trillion.

Unsecured borrowings of its subsidiaries amounted to about KRW 500 billion. S&P judged that there are no significant risks such as structural or contractual subordination in Korea South-East Power's capital structure. The proportion of Korea South-East Power's senior debt is about 13%, which is lower than S&P's rating benchmark of 50%.

S&P evaluated Korea South-East Power as a core subsidiary of KEPCO (AA/stable/A-1+) and assigned it the same credit rating as KEPCO. Korea South-East Power plays an integral role in KEPCO's stable electricity supply. Korea South-East Power, along with the other five power subsidiaries under KEPCO, is responsible for most of KEPCO's power generation, which accounts for about 80% of the domestic power market.

S&P assigns KEPCO the same credit rating as the sovereign credit rating (AA/stable/A-1+) in recognition of KEPCO's special public status in implementing the government's power supply policy.

S&P assessed that Korea South-East Power has limited capacity to maintain its standalone credit profile, currently rated 'bbb-', due to declining profitability and increased capital expenditures. However, since Korea South-East Power is assigned the same credit rating as the sovereign credit rating, S&P explained that any weakening of the standalone credit profile does not affect the agency's credit rating for the company.

This content was produced with the assistance of AI translation services.