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Rating Action:

Moody's assigns A1 rating to CLP Power's MTN drawdown

 The document has been translated in other languages

18 Oct 2012

Hong Kong, October 18, 2012 -- Moody's Investors Services has assigned an A1 rating to the fixed-rate notes to be issued by CLP Power Hong Kong Financing Limited, the wholly owned financing subsidiary of CLP Power Hong Kong Ltd (CLP Power).

The rating outlook is stable.

These notes are irrevocably and unconditionally guaranteed by CLP Power and are pursuant to its USD3.5 billion medium-term note program.

The company plans to use the proceeds for general corporate purposes.

RATINGS RATIONALE

"The A1 rating reflects CLP Power's strong and highly predictable cash flow, which is generated from its Scheme of Control operations under a highly stable regulatory environment in Hong Kong," says Ivan Chung, a Moody's Vice President -- Senior Credit Officer.

CLP Power is regulated by the government under the Scheme of Control Arrangement. The regulatory framework will remain unchanged for the current Scheme of Control period and will continue to offer a transparent tariff system, allowing 100% cost pass-through.

"In addition, the company's projected financial profile is strong for the rating. It also has a good track record in accessing the domestic and international bank and capital markets, and has a well-managed debt maturity profile," adds Chung, also Moody's Lead Analyst for the company.

On the other hand, its liquidity profile may be pressured to a certain extent by its long-term capex plan and high dividend payments to its parent, CLP Holdings Ltd (CLPH, A2 stable), which has a weaker credit profile.

The A1 rating is further constrained by the weaker credit profile of CLPH, which continues to expand into the more risky non-regulated energy business in the region. Moody's considers the ratings of CLP Power and CLPH to be closely linked, and any negative rating pressure at one of the companies will result in a corresponding effect on the other.

The rating outlook is stable, reflecting Moody's expectation that the Scheme of Control will not undergo any material change before its expiry in 2018.

The outlook is also in line with its parent's stable rating outlook, which in turn reflects Moody's expectation that CLPH will: 1) successfully integrate the New South Wales (NWS) business; 2) gradually improve its financial profile; and 3) avoid major debt-funded acquisitions in the next 12-18 months.

The possibility of an upgrade is limited in the near term because of the low potential for growth in Hong Kong's mature power market and the challenges related to the consolidation of the NSW operations, which the company acquired in last year.

On the other hand, downward rating pressure would emerge if CLPH adopts a more aggressive strategy in pursuing overseas expansion, which results in a ratings downgrade owing to an increase in the group's business and financial risk profiles.

The key credit metrics that Moody's would consider for a downgrade include FFO/debt below 15-20%, debt/capitalization above 45-50%, and FFO/interest below 4x-4.5x on a consolidated basis.

The principal methodology used in this rating was Regulated Electric and Gas Utilities published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

CLP Power, a wholly owned and principal subsidiary of CLPH, is a vertically integrated company that is engaged in the generation, transmission and distribution of electricity in Hong Kong. It is regulated by the government under the Scheme of Control. It has a de facto monopoly over Kowloon and the New Territories, which altogether account for over 80% of Hong Kong's population.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Ivan Chung
VP - Senior Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Patrick Mispagel
Associate Managing Director
Project & Infrastructure Finance
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's assigns A1 rating to CLP Power's MTN drawdown
No Related Data.
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