Asian power industries seen stable until next year

MANILA, Philippines - The power industries in Asia, including the Philippines, are expected to remain stable in the next 12 to 18 months, Moody’s Investors Service said in a report.

Moody’s said this is primarily driven by government and regulatory policy continuity as well as easing fuel prices.

“The policy pillars of governments and regulators across the region will ensure that the major power utilities will maintain their dominant or monopolistic positions, while independent power producers will benefit from reliable purchase contracts,” said Mic Kang, Moody’s vice president and senior analyst.

This means there would be no expected “excessive competition leading to margin erosion for power utilities.”

“Also, stable to declining trends for fuel prices are taking pressure off weak tariff systems -- wherein the ability to pass through higher costs to consumers is generally limited -- particularly for the major utilities in China, Indonesia, Korea, Malaysia and Thailand,” Kang added.

In the case of the Philippines, Moody’s said large investments are required “to improve efficiencies in transmission and distribution.”

Moody’s currently rates the Power Sector Assets and Liabilities Management Corp. as Ba1 with stable outlook and the National Power Corp. also at Ba1 with stable outlook.

“Increased operational cash flows from newly commissioned power plants, easier fuel prices, and ad-hoc tariff increases or subsidies for state-owned power utilities will help offset the rise in capital expenditure expected over the outlook period,” Moody’s said, referring to the nine power utilities covered in the report such as China, Hong Kong, India, Indonesia, Korea, Malaysia, Singapore, Thailand and the Philippines.

“However, lower financial cushions in some cases mean that some utilities will have less room to maneuver if broad sector conditions deteriorate,” said Moody’s.