Fitch: Sovereign support for Korea utilities

Fitch Ratings said it said in a new report that although the key Korean state-owned power and utility companies' credit metrics substantially deteriorated in 2008, their strong links with the state continues to support their credit quality.

All of Korean power and utility company ratings reflect a significant element of implied government support, Fitch said. The agency said it believes that these companies are so important to the government that they are all rated at the same level as the sovereign, or one notch below. Therefore if the sovereign rating is downgraded, the utilities' ratings would be downgraded, the agency said.

Higher fuel costs, the depreciation of the Korean won and insufficient tariff increases caused the credit metrics of key power and utility companies to decline in 2008, Fitch added.

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