S&P cuts Huaneng Power

Standard & Poor's said it lowered its long-term corporate credit rating on Huaneng Power International Inc. to BBB from BBB+.

The outlook is stable.

The rating adjustment reflects Huaneng Power's weakening financial profile as a result of a declining operating margin and increasing leverage, the agency said.

S&P said Huaneng Power's financial profile has been weakened by a combination of rising fuel costs, especially during 2004, and increasing debt financing associated with aggressive capacity expansion. The rating takes into consideration a cost pass-through mechanism, effective since May 1, which allows a portion of coal price increases to be reflected in tariff increases. However, the company expects to recover only about 50% of its total fuel cost increases from tariff adjustments due to its large exposure to fuel price risks.

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