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Rating Action:

Moody's assigns A2 rating to CGN's MTN drawdown

 The document has been translated in other languages

19 Jun 2019

Hong Kong, June 19, 2019 -- Moody's Investors Service has assigned an A2 senior unsecured rating to China General Nuclear Power Corporation's (CGN, A2 stable) proposed USD notes drawdown, to be issued by its wholly owned subsidiary CGNPC International Limited's medium-term note (MTN) program.

The MTN will be unconditionally and irrevocably guaranteed by CGN.

The outlook for the ratings is stable.

The proceeds of the drawdown will be used to refinance existing debt and for general corporate purposes.

RATINGS RATIONALE

"The A2 senior unsecured rating on the MTN drawdown reflects CGN's A2 issuer rating, and the fact that the MTN is unconditionally and irrevocably guaranteed by CGN," says Ada Li, a Moody's Vice President and Senior Credit Officer.

"We also expect the size of the drawdown to be manageable within CGN's A2 issuer rating," adds Li.

CGN's A2 issuer rating incorporates its baseline credit assessment (BCA) of ba2 and a six-notch uplift, based on Moody's expectation of a "Very High" level of support from and a "High" level of dependence on China's central government (A1 stable) in times of need, under Moody's joint-default analysis approach for government-related issuers.

Moody's expectation of government support is based on CGN's national strategic importance as China's largest domestic nuclear power generation company by installed capacity, its technological capabilities, its status as a central state-owned enterprise, and its role in undertaking high profile overseas clean energy projects.

CGN's BCA of ba2 reflects the company's high financial leverage, driven by its debt-funded capital expansion, policy-driven nuclear power additions, and overseas investments. In addition, the BCA considers the inherent risks associated with the construction and operation of nuclear power plants.

The BCA also considers the presence of favorable policies for clean energy, amid an evolving regulatory environment.

Moody's expects that over the next three years, CGN's annual capital expenditure will measure around RMB55 billion, and adjusted funds from operations (FFO) to debt around 7%.

The stable outlook reflects Moody's expectation that (1) CGN will maintain its current credit profile and that the company's financial metrics will not materially change relative to Moody's base case expectation; and (2) central government support is unlikely to change materially, given the company's systematic importance, technological strengths and status as a central state-owned enterprise.

Upward ratings potential is limited, given Moody's expectation of the company's business and financial profile.

Nevertheless, the company's BCA and, potentially its ratings, could rise if (1) there is a continuation of a more predictable and supportive regulatory regime over time; or (2) CGN's financial profile improves significantly.

Financial indicators that could lead to an upgrade include FFO to debt exceeding 12% and debt to capitalization falling below 65% on a sustained basis.

Moody's could downgrade CGN's ratings if (1) there are signs of weakening support from the central government ; (2) the company's standalone credit profile deteriorates because of, for example, adverse changes in China's regulatory environment, further aggressive debt-funded expansions, or mergers; or (3) its business risk rises significantly, owing to its nuclear technology or overseas operations.

Financial metrics that could lead to a downgrade include FFO to debt below 6% or debt to capitalization above 75% for a prolonged period.

The methodologies used in this rating were Regulated Electric and Gas Utilities published in June 2017, and Government-Related Issuers published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

China General Nuclear Power Corporation (CGN) is a central government-owned clean energy company. It specializes in nuclear power generation, solar and wind power.

Among the three nuclear power plant operators in China, CGN has the highest nuclear operating capacity, reaching 24.3GW in operation at the end of 2018 with a further 7.4GW under construction as of the same date.

At the end of 2018, the company also had 26.9GW of non-nuclear generating capacity, including 13.2GW of wind power capacity. Nuclear power generation accounted for 47% of its installed capacity at the end of 2018.

CGN is 90% directly owned by the State-owned Assets Supervision and Administration Commission of China's State Council. The Guangdong Government, through Guangdong Hengjian Investment Holding Co Ltd (A3 stable), owns the remaining 10%.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entity is participating and the rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Ada Li
VP-Sr 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
Client Service: 852 3551 3077

Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077

No Related Data.
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