Stable outlook on PH power sector – Moody’s

MANILA , Philippines – Moody’s Investor Services said in an announcement that the Philippines’ power sector is expected to be stable in the next 12 to 18 months. 

The international credit rater highlighted that fundamental business conditions will remain stable since there is “no excessive competition leading to margin erosion for power utilities, [and] no major constraints on fuel supply.”

To improve its industry outlook, Moody’s stressed the need “to improve efficiencies in transmission and distribution.” 

Volatile fuel supply, however, will result in a downgrade in the sector’s outlook, Moody’s warned.

Moody’s upgraded both state-run Power Sector Assets & Liabilities Management Corp (PSALM) and National Power Corp. (Napocor) to Ba1, or stable, last October 2012.

The outlook in the Philippines’ power sector is in line with its neighbors China, Hong Kong, Indonesia, Korea, Malaysia, Singapore and Thailand.

Moody’s said these countries’ government and regulatory policy support the sector and the stable-to-falling fuel prices.

Moody’s said that, “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.”

“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, a Moody’s Vice President and Senior Analyst.

Kang added that declining fuel prices would put pressure off weak tax systems, alleviating consumers in China, Indonesia, Korea, Malaysia and Thailand from higher pass through costs.

But the power sector of India, an outlier, was given a negative outlook due to “a unique set of structural challenges,” Moody’s said. – Rappler.com