Moody's cuts CLP Holdings to A2

Moody's Investors Service said it downgraded to A2 from A1 the issuer rating of CLP Holdings Ltd. and to A1 from Aa3 the senior unsecured debt rating of CLP Power Hong Kong Ltd., the 100%-owned regulated subsidiary of CLP Holdings. This concludes a review that began in January.

The outlook is stable.

This action reflects the projected weakening in the financial profile of both CLP Holdings and CLP Power as a result of the group's capital management initiatives to leverage up CLP Power via debt-funded dividend upstream to CLP Holdings at a time when the permitted rate of return under Scheme of Control Arrangement will be lowered post 2008, Moody's said.

Furthermore, the lower cash flow contributions from CLP Power and ongoing investment in overseas unregulated power generation businesses will increase the group's overall business risk profile, the agency said. The ratings continue to be underpinned by stable cash flow generated by CLP Power, Moody's added.

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