Napocor maintains credit rating

MANILA, Philippines - Standard & Poor’s Ratings Services (S&P) has maintained its credit rating on state-run National Power Corp. (Napocor).

The state-run agency enjoys a ‘BBB’ rating on long-term local and foreign currency ratings and ‘axA’ ASEAN scale rating with a stable outlook from S&P.

The debt watcher said the rating reflects that the country’s present rating, which is a notch above the minimum investment grade, over the next two years.

It noted the rating is based on its view of an “’almost certain’ likelihood of timely extraordinary support from the government for the company in the event of financial distress.”

“We have therefore equalized the ratings on the government-owned electricity provider with those on the sovereign rating,” S&P said.

The assessment covered Napocor’s “critical” role as the sole provider of electricity to off-grid areas, also known as missionary areas.

“National Power is specifically tasked to undertake missionary electrification, which we view as a key social policy initiative of the government,” S&P said.

“The private sector is unlikely to fill Napocor’s role because of the low returns in the business and the limited market size,” it added.

And since Napocor is state-owned, there is significant government control over key budgetary and strategic decisions, it said.

Prior to the passage of Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001, Napocor used to hold the monopoly over power generation and transmission.

Post EPIRA, the agency was mandated to privatize its power assets and is now responsible for providing electricity to areas not connected to the grid.