Fitch: Won affects Korean utilities

Fitch Ratings said it said in a new report that although the substantially weaker won during the second half of 2008 and the first quarter of 2009 caused Korean energy and utility companies' cash flow and credit metrics to deteriorate, the recent appreciation of the won should alleviate the financial pressure to some extent.

Fitch noted that the ratings of Korean state-owned power and utility companies are linked to the Korean sovereign ratings due to the strength of the companies' legal, operational and strategic ties with the government, rather than their stand-alone financial profile, the agency said.

The agency also said it believes that Korean energy and utility companies will generally benefit from the recent appreciation of the Korean won, since the stronger won will lower the won-denominated fuel costs.

While state-owned power and utility companies such as Korea Electric Power Corp. and Korea Gas Corp. will benefit from stronger cash flows, Fitch said it believes the stronger won will be less beneficial for SK Energy.

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