New York, June 01, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 25 May 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Government-Related Issuers Methodology
Assigning a Baseline Credit Assessment (BCA): The majority of Government-Related Issuers (GRIs) begin with an assessment of the GRI's standalone strength (i.e. BCA) – its ability to service and repay outstanding debt without recourse to extraordinary support from the supporting government - using the published sector-specific methodology that is most suitable for the predominant activities of the GRI. Our assessment of standalone strength includes any day-to-day support received from the government that can be clearly distinguished from extraordinary support. Support mechanisms, such as an obligation of the government to ensure the GRI's solvency and liquidity, are reflected in the BCA when they are legally or contractually documented.
Government uplift: The GRI's ratings include any uplift due to systemic support and typically focus on three structural factors and three factors explaining the level of the government's willingness to provide support. Structural factors address the legal and quasi-legal aspects of the government's relationship with the GRI and include: (1) guarantees, (2) ownership level and (3) barriers to support. The factors underlying willingness consider the softer connections between the two entities and include (4) the likelihood of government intervention, (5) political linkages and (6) economic importance. Support is determined using a joint default analysis framework which considers an estimate of the likelihood of extraordinary support, an assessment of the credit quality of the supporting government, and default correlation between the two entities.
GRIs without a BCA: In limited instances, it is not possible or meaningful to assign a BCA. The GRI is so inextricably linked to the government that a meaningful standalone BCA cannot be derived. In such cases, a top-down analytical approach is used that chiefly considers the ability and willingness of the government to provide timely support, instead of the usual bottom-up approach of starting with the BCA and then considering uplift towards the government's rating.
• China General Nuclear Power Corporation
• China Huadian Corporation LTD.
• China Huaneng Group Co., Ltd.
• China Southern Power Grid Co., Ltd.
• China Three Gorges Corporation
• Gansu Province Electric Power Invt. Gp.
• Guangdong Hengjian Investment Holding Co Ltd
• Korea District Heating Corporation
• Korea Electric Power Corporation
• Korea Gas Corporation
• Korea Water Resources Corporation
• Shenergy (Group) Co., Ltd.
• State Grid Corporation of China
• State Power Investment Corporation Limited
• Zhejiang Provincial Energy Group Co. Ltd
The principal methodology used for these rated entities was Investment Holding Companies and Conglomerates published in July 2018. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Investment Holding Companies and Conglomerates
For Investment Holding Companies we consider the following factors:
Investment Strategy: Investment strategy is considered because transparent and more conservative investment strategies can provide a longer-term view of an investment holding company's business profile, which is particularly relevant given the tendency for investment holding companies to acquire and divest assets. Greater visibility over the evolution of the company's investment portfolio is supported by clearly defined investment strategies in terms of the types of assets the company seeks to invest in, the intended tenure of its investments and the targeted composition of its investment portfolio. We assess the investment holding company's investment policies and guidelines, as well as management track record. The existence of publicly communicated goals and a commitment to adhere to these is also helpful in our assessment, particularly when a proven track record is present.
Asset Quality: The asset quality of the investment portfolio represents one of the drivers of the company's credit risk. Our assessment considers investment concentration, geographic and business diversity, and portfolio transparency. The transparency and consistency of management in communicating information is a key element of our analysis. Listed investments in markets where regulatory disclosure requirements are strong can help to provide more reliable information.
Financial Policy: Management and board tolerance for financial risk is considered as it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. This is important given an investment holding company's exposure to equity risks, which can result in greater volatility in leverage metrics relative to other corporates. The acquisition and divestiture activities of investment holding companies also make it more challenging to estimate future leverage. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations also include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets.
Estimated Market Value-Based Leverage (MVL): The majority of an investment holding company's assets are typically equity participations in subsidiaries and associates. In the event that the holding company decides to lever its equity returns by funding part of the investments through the issuance of debt, the credit risk of this debt is significantly impacted by asset values available to cover potential fixed debt charges. The MVL is measured as Net Debt/Estimated Market Value of Portfolio Assets.
Debt Coverage and Liquidity: Operational cash flows that can regularly cover interest expenses reflect positively on the investment holding company's financial flexibility and long-term viability. Investment holding companies that do not have a sufficiently mature portfolio paying an adequate level of dividends to cover their interest and debt payments are more reliant upon cash and credit facilities, which we believe should be reserved for a market downturn. The timing of debt repayments can play a particularly significant role in the credit profile of an investment holding company as the concentration of maturities can present liquidity challenges and heighten refinancing risk. Debt Coverage and Liquidity is measured by ratios such as Funds from Operations plus Interest/ Interest Expense and Liquidity/Debt maturities.
Other Considerations: Other considerations may include, but are not limited to, corporate governance, financial controls, liquidity management, group complexity, degree of influence over dividends of investees, event risk as well as parental and institutional support.
For conglomerates we incorporate a balanced view of the credit risk in each business segment, with further consideration of the potential overall risk reduction due to industry and country diversification of assets and cashflows, portfolio stability, together with the ownership structure and the relationship between subsidiaries and the broader group.
Credit Risk of Each Business Segment: We assess the individual business and credit risk profile of each major industry segment of a conglomerate by applying the scorecard from the respective industry sector methodology. In most cases, it is most meaningful to do this only for the two or three largest industry segments. Where necessary, this approach includes an allocation of the conglomerate's Holdco debt to its subsidiary businesses in order to estimate individual ratios which allow for a weighted average calculation for the total group. The weighting is usually centered around cash flow metrics (such as each major segment's contribution to EBITDA) since this can represent an approximation for the debt capacity of the various subsidiaries.
Risk Reduction from Industry/Country Diversification: Business diversification within a conglomerate can bring potential benefits for creditors. At the same time, diversification exists only to the extent that correlation is low across the various businesses. We therefore take a very pragmatic and cautious approach to diversification.
Portfolio Stability: The stability of a conglomerate's portfolio during a certain time period is assessed by analyzing the stability of investments in assets and their asset mix (e.g. by sector, country, or revenue vs. cash flow focus), the number of acquisitions, spin-offs, and "greenfield" developments. Strong discipline with clear guidance on a balanced investment strategy and limited event risk is considered as a positive step for the overall credit risk of the conglomerate.
Ownership Structure: The type of ownership might be a potential source of benefit for the credit assessment of the conglomerate. For example, a conglomerate with stable ownership (possibly majority remaining with a family) and a clear succession plan is assessed positively. Conversely, unclear ownership influences or weak governance structures may impair the overall rating outcome, and is assessed negatively.
Relationship Between Subsidiaries and the Broader Group: There might be circumstances under which the parent holding provides specific financial support to a business which is part of the overall conglomerate. This may be accomplished, for example, through intercompany loans, equity top-ups, asset transfers, granting of financial guarantees or debt forgiveness. The overall strength of support depends on the type of measure and our assessment of the willingness and ability of the parent to grant this support.
• Beijing Enterprises Group (BVI) Company Ltd
The principal methodology used for these rated entities was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts
Third-party credit support: The goal of third-party credit support is to substitute the credit risk of the support provider for the credit risk of the issuer. For credit substitution to be achieved, investors must be insulated from the risk of payment default by the underlying obligor. Generally, the long-term ratings on credit-supported transactions track the long-term rating assigned to the credit provider.
Additional Considerations: Credit substitution requires more than just the presence of a credit support instrument from a third-party credit provider. The transaction documentation provides clear instructions to ensure that payments under the credit support facility are made when due and that there are no impediments to the timely payment of debt service. The key elements evaluated include: mitigation of bankruptcy risk of issuer; sufficiency of credit support; structural provisions which provide for the timely payment of debt service; bondholders to be paid in full if credit support expiration or termination will result in a change.
• Hanwha Energy USA Holdings Corporation
The principal methodology used for these rated entities was Regulated Electric and Gas Networks published in April 2022. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Regulated Electric and Gas Networks
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• State Grid International Development Limited
The principal methodology used for these rated entities was Regulated Electric and Gas Utilities published in June 2017. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Regulated Electric and Gas Utilities
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• Beijing Gas Group Company Limited
• Binhai Investment Company Limited
• China General Nuclear Power Corporation
• China Oil and Gas Group Limited
• China Resources Gas Group Limited
• China Southern Power Grid Co., Ltd.
• China Three Gorges Corporation
• China Yangtze Power Co., Ltd
• CLP Holdings Limited
• ENN Natural Gas Co., Ltd.
• Korea District Heating Corporation
• Korea Electric Power Corporation
• Korea Gas Corporation
• Kunlun Energy Company Limited
• Shenergy (Group) Co., Ltd.
• State Grid Corporation of China
• The Hong Kong and China Gas Company Limited
• Zhongyu Energy Holdings Limited
The principal methodology used for these rated entities was Regulated Water Utilities published in June 2018. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Regulated Water Utilities
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• China Water Affairs Group Limited
• Hangzhou Water Group Co., Ltd
• Korea Water Resources Corporation
The principal methodology used for these rated entities was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Unregulated Utilities and Unregulated Power Companies
Revenue Generation and Recovery Cost Framework: Metrics may include but are not limited to monopoly status; rate setting flexibility; strength of customer base and service area as measured by resource base, population, wealth, economic diversity, and growth projections; length and quality of customer contracts and contractor credit quality; scale; market framework and market diversification; structural and creditor protections; and ownership model.
Cost Recovery: Metrics may include but are not limited to transparency and timeliness of rate setting process by governing board or regulatory body including support for setting appropriate rates and charges to service debt; exposure to potential rate shocks; cash flow predictability.
Generation and Procurement Risk: Metrics may include but is not limited to ability to meet power supply commitments; the fuel mix; power price hedging; the diversity, cost and reliability of power supply sources; exposure to additional debt needs or regulatory risk; scale and complexity of the capex programme.
Competitiveness: Metrics may include but are not limited to market position, average system retail rate relative to regional peers or state average and material cost pressure that could lead to higher rates.
Financial Position, Policy and Ownership: Metrics may include but are not limited to corporate financial policy, days cash on hand; debt service coverage ratio measured by debt service and other fixed charges by net revenue, adjusted debt ratio of debt and ANPL (adjusted net pension liability) to net assets and working capital; ratio of debt to cash flow; interest coverage metrics and debt to asset metrics. Assessments may include but are not limited to an Issuer's desired capital structure / credit profile, and its adherence to its commitments and our views on the ability of the company to achieve its targets, an assessment of the likelihood and potential negative impact of M&A or other types of balance-sheet-transforming events, and the likelihood of uncontracted financial support being provided by owners; and the protective terms of debt documentation including but limited to restrictions on business activities, use of debt and revenue distributions; and control and liquidity afforded to creditors.
• Beijing Energy Holding Co., Ltd.
• China Huadian Corporation LTD.
• China Huaneng Group Co., Ltd.
• China Longyuan Power Group Corporation Ltd.
• China Resources Power Holdings Co., Ltd
• Coastal Emerald Limited
• Gansu Province Electric Power Invt. Gp.
• Guangdong Hengjian Investment Holding Co Ltd
• Huaneng Power International, Inc.
• Korea East-West Power Co., Ltd.
• Korea Hydro & Nuclear Power Co., Ltd.
• Korea Midland Power Co., Ltd.
• Korea South-East Power Co., Ltd.
• Korea Southern Power Co., Ltd.
• Korea Western Power Co., Ltd.
• SK E&S Co. Ltd.
• State Power Investment Corporation Limited
• Zhejiang Provincial Energy Group Co. Ltd
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on https://ratings.moodys.com for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action.
For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.com
for the most updated credit rating action information and rating history.
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