Fitch Rates Positive for EVN

Diep Nguyen

15:28 29/11/2019

BizLIVE -

In Vietnam, our standalone credit profile of 'bb' for Vietnam Electricity (EVN, BB/Positive) has upside risk upon consistent application of electricity regulatory reforms - including more evidence of tariff adjustments that reflect cost changes.

Fitch Rates Positive for EVN
Fitch Ratings expects a marginal decline in sector average leverage for Asia-Pacific (APAC) utilities in 2020, as growth in funds from operations outpaces the rise in debt. We expect sector median capex to come down from the previous peaks, but to remain high.
The sector outlook is stable for most APAC regions - including China, Hong Kong, Korea, Malaysia and Australia - but negative for India and Indonesia and positive for Vietnam. Fitch expects falling coal prices to more than offset the impact of potentially lower tariffs under a floating-tariff mechanism for China coal-fired power generating companies (gencos).
Fitch expects financial stress at some Indian state distribution companies (discoms) to have a negative impact on the power sector, with small power gencos being more affected than state-owned firms.
Fitch's negative sector outlook on Indonesia reflects regulatory uncertainties surrounding the new 'pricing and return' regulations for PT Perusahaan Gas Negara Tbk (PGN, BBB-/Stable), and PT Perusahaan Listrik Negara Tbk's (PLN, BBB/Stable) shrinking headroom in its standalone credit profile under weak collection of compensation for cost under-recoveries, as well as high capex.
In Vietnam, Fitch's standalone credit profile of 'bb' for Vietnam Electricity (EVN, BB/Positive) has upside risk upon consistent application of electricity regulatory reforms - including more evidence of tariff adjustments that reflect cost changes.
The rating outlook is stable for the sector, as most of the rated APAC utility issuers are government-related entities (GREs), whose ratings are aligned with Fitch's assessment of their respective sponsor governments and where the stable rating outlooks reflect those on the respective government and the likelihood of state support to remain unchanged.

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