Moody’s upgrades Napocor, PSALM credit ratings

MANILA, Philippines - Following its investment grade stomp for the Philippine government, Moody’s Investors Service has subsequently upgraded the credit rating of National Power Corp. (Napocor) and the Power Sector Assets and Liabilities Management Corp. (PSALM) to Baa3 from Ba1 with a positive outlook. 

Moody’s said the decision to upgrade was consistent with the credit rating hike given to the Philippine government’s long-term foreign currency and local currency ratings to

Baa3 with a positive outlook last Oct. 3.

“The Baa3 senior unsecured bond rating reflects the Philippine government’s unconditional and irrevocable guarantee for Napocor’s rated long-term bonds,” said Mic Kang, a vice president and senior analyst at Moody’s.

He noted that Napocor had transferred 99.9 percent of its rated US dollar bonds to PSALM, which was also upgraded to Baa3 with a positive outlook as a result of the sovereign rating upgrade – including $300 million due in 2028 and $160 million due in 2016.

“The positive outlook is in line with that of the sovereign’s, reflecting the government’s guarantee on the bond,” Kong said.

However,  the Moody’s executive warned that a downgrade in the sovereign rating could also trigger a rating downgrade for Napocor and PSALM’s bond.

Napocor is wholly owned by the government. It primarily operates and manages the power facilities that have been transferred to PSALM.

On the other hand, Kang said “PSALM’s ratings are underpinned by its distinct policy role and its close integration with the government.”

He noted that PSALM’s policy role is to restructure and reform the Philippine power sector. In addition, the government is obligated to assume any remaining assets and liabilities at the end of PSALM’s corporate life.