Fitch cuts Kepco outlook

Fitch Ratings lowered its outlook on Korea Electric Power Corp. to stable from positive and confirmed its senior unsecured foreign-currency rating at A-.

Fitch said the outlook change reflects continued delays in Kepco's plans to divest its generating subsidiaries and the increased uncertainties over the timing, size and pricing of the sale following the impeachment of Korea's president, Roh Moo-Hyun.

Fitch notes that Kepco has yet to sell any part of its generating subsidiaries in nearly three years following the unbundling of its generating operations into six gencos. Fitch says that the initial plan to divest a majority of Korea South-East Power Co. during early 2003 was delayed to this year.

Fitch points out that the delay was announced after unsuccessful discussions with bidders for a large strategic stake in Kosepco. The agency notes that following this first attempt, Kepco modified its approach in selling Kosepco from the sale of a large strategic stake (to a single buyer or consortium) in the range of 40% to 51% to an IPO in the range of 10% to 15% in conjunction with a strategic sale (where the IPO and the strategic sale would total some 30% of Kosepco).

Fitch observes that the change in approach to a market sale (i.e. an IPO) has made the timing, size and pricing of the potential sale contingent on conditions in the Korean stock market, which is unpredictable by nature and is outside the control of Kepco management.

Fitch says that the recent impeachment of president Roh has pushed the country into political disarray, and that the resulting uncertainties will likely give pause to investors on either a strategic sale or a market sale. Fitch also notes that given the current political climate, power sector reforms will likely fall even further down the government's priority list.

Moody's rates SK Telecom bond A3

Moody's Investors Service assigned an A3 rating with a negative outlook to SK Telecom Co. Ltd's proposed $300 million bond issue. The negative outlook reflects the outlook for Korea's foreign currency sovereign rating.

Moody's says that the rating reflects the company's ongoing strong financial fundamentals coupled with greater clarity in its corporate governance practices and structure following the March 12 shareholders meeting that approved the appointments of four in-house and four outside directors.

In addition, Moody's noted positive developments for SK Telecom in the area of corporate governance and its relationship with the broader SK group. Moody's further noted the absence of any indication of direct financial support from SK Telecom in the reorganization of SK Networks.

SK Telecom continues to demonstrate a very strong operating and financial profile for its rating level, Moody's said. For 2003, EBITDA margins reached 49%, EBITDA/interest was 12.5x and Debt/EBITDA 0.9x.

S&P rates SK Telecom bonds A-

Standard & Poor's assigned an A- rating to SK Telecom Co. Ltd.'s proposed $300 million senior unsecured global bonds due 2011 with a stable outlook.

S&P said SK Telecom's rating is based on the company's dominant position in Korea's growing wireless phone market, backed by its strong cash flow generation, stable customer base, high-quality services and strong brand image.

Despite the introduction of number portability between providers, S&P expects SK Telecom to retain its market share, backed by its competitive services.

The rating on SK Telecom is also supported by the high penetration rate for wireless phone services in Korea.

SK Telecom generates strong earnings and cash flow, with funds from operations (FFO) to total debt exceeding 80% in 2003 on a parent-only basis, S&P noted. Even taking into account capital spending requirements for 3G services and the possibility that the company's earnings will be lower than expected in the next few years, SK Telecom's credit protection measures are expected to remain strong, with FFO to total debt over 60% and total debt to capital between 35% and 40%.

S&P raises Taiwan's Hon Hai Precision outlook

Standard & Poor's raised its outlook on Taiwan's Hon Hai Precision Industry Co. Ltd. to positive from stable and confirmed its ratings including its senior unsecured bonds at BBB.

S&P said the revision reflects Hon Hai's sustained solid financial profile, which exhibits strong debt protection measures and robust liquidity, combined with its continuous generation of positive free operating cash flow.

Hon Hai's rating reflects its low-cost competitiveness, strong mechanical engineering expertise, consistently solid operating performance and strong financial profile, S&P added.

However, these factors are moderated by the high degree of the company's customer concentration, its exposure to short product cycles in volatile end-markets, and ongoing pricing pressure.

Moody's rates Philippines' National Power bonds Ba2

Moody's Investors Service assigned a Ba2 rating to National Power Corp.'s proposed peso-denominated zero-coupon bonds. The outlook is negative.

Moody's said the rating is based on the irrevocable and unconditional guarantee by the Republic of the Philippines despite National Power's weak operating and financial profiles.

The negative outlook is in line with the negative outlook for the Philippines' Ba2 local currency rating.

Moody's added that is expects the Philippines government will honor its commitment to the outstanding guaranteed obligations of National Power regardless of the progress of power sector restructuring and privatization.

Moody's rates TuranAlem bond Baa3

Moody's Investors Service assigned a rating of Baa3 to the $300 million issue of senior unsecured notes by TuranAlem Finance BV. The outlook is stable. The notes are unconditionally and irrevocably guaranteed by JSC Bank TuranAlem of Kazakhstan.

Moody's said the rating is at the sovereign ceiling for such ratings in Kazakhstan, reflecting Bank TuranAlem's important role in the banking system of Kazakhstan, where it is one of the largest and most dynamically growing institutions.

The rating also takes into account the high likelihood of support from local authorities should the need arise.

Moody's cautions that the rating is constrained by the still difficult operating environment in Kazakhstan. Furthermore, the bank itself is still relatively small, has a potentially volatile funding base and certain concentrations in the loan book.

Fitch upgrades AES Gener

Fitch Ratings upgraded AES Gener SA including raising its foreign currency rating to BB from BB-. Fitch also assigned a final rating of BB rating to the company's $400 million 7.5% 10-year bond issuance.

Fitch said the upgrade reflects the completion of a significant portion of the company's recapitalization plan, including the successful placement of the international bond issuance and receipt of $298 million representing repayment of the mercantile account. The company is expected to apply proceeds from both transactions to reduce debt by $300 million and refinance maturing debt with the new bond, which should improve Gener's prospective capitalization, leverage and interest coverage ratios.

The upgrade also reflects Gener's position as the largest thermal generator in Chile, its competitive dispatch position, its operating strategy to optimize contract electricity sales, a constructive regulatory environment, an economically sound and growing service area, and experienced management, Fitch said.

The operating fundamentals of Gener continue to reflect the company's sound position in the Chilean electricity market. Electricity demand growth in Chile has been almost 6% over the last 12 months and regulated prices have continued their upward trend, increasing approximately 9% in U.S. dollar terms in the October 2003 tariff reset.

Gener further benefits from its project-like structural characteristics, including long-dated power purchase agreements with financially strong customers and fuel supply contracts that reduce business risk, Fitch said. The rating also considers exposure to variations in hydrology and the impact on electricity generation, commodity price risks, currency risks and ongoing competitive pressures.

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