S&P and Hankyung Rating: "SK E&S Dividend Increase Negatively Impacts Credit Rating"

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[Asia Economy Reporter Kim Bong-gi] International credit rating agency S&P forecasted on the 17th that SK E&S's recent announcement of an expanded dividend policy could lead to a reduced capacity to maintain its credit rating. SK E&S previously disclosed on the 14th that it would pay a total dividend of 730 billion KRW for last year's performance.

S&P stated, "This level significantly exceeds the previous estimate of 300 billion to 500 billion KRW," and evaluated that "the company is executing an aggressive financial policy by expanding dividends from approximately 100 billion to 300 billion KRW during 2015?2017 to 670 billion KRW in 2018 and 730 billion KRW in 2019." It further predicted, "Over the next two years, SK E&S's financial indicators will vary depending on whether it sells non-core assets and uses the proceeds to repay borrowings."

However, S&P added, "Considering last year's improved operating performance and stable profitability forecast for this year, the dividend increase has no immediate impact on the credit rating." S&P has assigned SK E&S a corporate credit rating of BBB with a 'negative' outlook.

Korea Ratings also diagnosed in a report on the same day that "in the absence of additional asset sales, the dividend size exceeding expectations and additional capital injections inevitably have a negative effect on creditworthiness."

Furthermore, it anticipated, "Investment in the 1000 MW-class Yeoju Energy Service is scheduled to accelerate from this year, and if 70% of the project cost is financed through project financing (PF), it will place additional burdens on financial stability."

Korea Ratings assigned an 'AA+' rating with a 'negative' outlook to SK E&S's unsecured bonds.

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