Singapore, February 18, 2022 -- Moody's Investors Service has revised the rating outlooks of Singapore
Power Limited (SP), SP PowerAssets Limited (SPPA) and SP Group Treasury
Pte. Ltd. (SPGT) to positive from stable.
At the same time, Moody's has affirmed SP's Aa1 issuer rating
and a2 Baseline Credit Assessment (BCA).
Moody's has also affirmed the Aa1 senior unsecured ratings of SPPA,
as well as the Aa1 backed senior unsecured ratings of SPGT.
A full list of the affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
"The positive outlook reflects our expectation for a solid improvement
in SP's credit metrics and liquidity post the company's divestment
of its stake in AusNet Services (Baa1 stable) because we expect that a
material amount of the proceeds will be used to reduce debt and fund capital
expenditure, after special dividends," says Ray Tay,
a Moody's Senior Vice President.
Moody's projected credit metrics for SP will materially strengthen to
levels that could exceed the rating agency's tolerance for the current
BCA and rating. For example, SP's three-year average
funds from operations (FFO)/debt will range from 20% to 25%
compared with an earlier projection of 15% to 20%.
The projected metrics take into account, on a pro rata basis,
the debt and capital spending of SP's remaining Australian operation -
SGSP (Australia) Assets Pty Ltd (A3 stable).
SP's Aa1 issuer rating considers the company's BCA of a2 and a four-notch
uplift based on Moody's Joint Default Analysis approach for government-related
issuers. This approach assumes a very high level of support from
the Singapore government (Aaa stable) — through SP's parent,
Temasek Holdings (Private) Limited (Aaa stable) — in a stress situation,
given Temasek's status as Singapore's sovereign wealth fund.
SP's BCA reflects its strategic importance to Singapore's electricity
sector as the monopoly transmission and distribution (T&D) operator.
SP's overall credit quality is further underpinned by its strong financial
profile resulting from very stable and predictable cash flows, particularly
from its regulated assets in Singapore. The BCA also factors in
the incremental funding needs arising from SP's capital expenditure (capex)
program, which will be partly funded by the divestment proceeds.
The capex program factors in opportunistic expansion in the "Sustainable
Energy Solutions" segment, a term which SP uses to denote investments
in renewable energy, electric vehicle charging infrastructure and
energy efficiency such as district cooling, for example.
Although such investments differ from SP's current regulated revenue
stream and can take place in other countries, Moody's does not expect
this new segment to fundamentally alter SP's strong credit profile,
given the nascent stage of development, and therefore, limited
scale.
Moody's rates the Singapore government's (Aaa stable) willingness to support
SP in times of need as "very high," reflecting the company's role
in managing and operating the country's only electricity T&D network.
In addition, Moody's assessment of dependence is "high" because
of the high correlation between the credit profiles of SP and Singapore.
Moody's views SPPA's rating as closely linked to SP's rating, because
as a fully owned subsidiary of SP, SPPA is likely to receive support
from the Singapore government through SP.
SPGT's medium-term note (MTN) program is unconditionally and irrevocably
guaranteed by SP. SP's obligations under the guarantee will rank
at least pari passu with all of its other present and future unsubordinated
and unsecured obligations. As such, the ratings of SPGT are
in line with SP's Aa1 issuer rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The positive outlook reflects SP's improving credit quality as the company
utilizes the divestment proceeds for debt repayment and capex.
Moody's could upgrade SP's BCA, and therefore the ratings of SP,
SPPA and SPGT, during the next 12 to 18 months if: (1) the
regulatory framework and shareholder remain supportive of SP; and
(2) SP's capex in unregulated businesses does not weaken its credit profile.
Specifically, Moody's could upgrade the ratings if SP's adjusted
FFO/debt is at least 22% and/or FFO interest coverage above 7.5x
on a consistent basis. The calculation of the metrics takes into
account the debt and capital spending of its Australian operations on
a pro rata basis.
SPPA's and SPGT's ratings are closely linked to that of SP, such
that their ratings will be upgraded if SP's rating is upgraded.
Given the positive outlook, a downgrade is unlikely but Moody's
could return the outlook of SP, SPPA and SPGT to stable if (1) the
company pursues an aggressive debt-funded expansion or capital
spending program that introduces additional regulatory or operational
risks, or (2) its financial performance reverts to Moody's projected
metrics pre-divestment, with FFO/debt remaining between 15%
and 20% on a sustained basis.
A change in Moody's assessment of the expected level of support from Temasek,
or a partial privatization of SP or its wholly owned subsidiary,
SPPA, or both, could also pressure the rating, as it
would negatively affect the support level under Moody's Joint Default
Analysis approach and the resultant rating uplift.
A downgrade of SP's rating will also trigger a downgrade of SPPA's and
SPGT's ratings.
The principal methodologies used in rating Singapore Power Limited were
Regulated Electric and Gas Utilities published in June 2017 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530,
and Government-Related Issuers Methodology published in February
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207.
The principal methodology used in rating SP Group Treasury Pte.
Ltd. was Regulated Electric and Gas Utilities published in June
2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530.
The principal methodology used in rating SP PowerAssets Limited was Regulated
Electric and Gas Networks published in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059225.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Singapore Power Limited (SP) is fully owned by Temasek Holdings (Private)
Limited, which is a sovereign wealth fund of the Singapore government.
SP owns and manages Singapore's only electricity transmission and distribution
network through its fully owned subsidiaries, SP PowerAssets Limited
(SPPA) and SP Cross Island Tunnel Trust — the owners of the assets
— and SP PowerGrid Ltd, which is the operator of the assets.
Through its fully owned subsidiaries, SP also owns and manages Singapore's
gas transmission and distribution network and provides market-support
services.
In addition, SP has a 40% stake in SGSP (Australia) Assets
Pty Ltd (A3 stable), which is an electricity and gas infrastructure
entity. SGSP (Australia) Assets' key assets include a gas distribution
network in the Australian state of New South Wales, an electricity
distribution network in the Australian state of Victoria, a 50%
interest in ActewAGL's distribution businesses, and a 34%
minority interest in United Energy Distribution.
LIST OF AFFECTED RATINGS
Issuer: Singapore Power Limited
.... Long-term Issuer Rating (Foreign
Currency), Affirmed at Aa1
.... Baseline Credit Assessment, Affirmed
at a2
Outlook Action:
....Outlook, revised to Positive from
Stable
Issuer: SP PowerAssets Limited
.... Long-term Issuer Rating (Local
Currency), Affirmed at Aa1
.... Long-term Senior Unsecured MTN
Programme (Local Currency), Affirmed at (P)Aa1
.... Long-term Senior Unsecured Debt
(Foreign and Local Currency), Affirmed at Aa1
Outlook Action:
....Outlook, revised to Positive from
Stable
Issuer: SP Group Treasury Pte. Ltd.
.... Long-term Backed Senior Unsecured
MTN Programme (Foreign and Local Currency), Affirmed at (P)Aa1
.... Long-term Backed Senior Unsecured
Debt (Foreign Currency), Affirmed at Aa1
Outlook Action:
....Outlook, revised to Positive from
Stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, 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 issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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.
Ray Tay
Senior Vice President
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Ian Lewis
Associate Managing Director
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
