Moody's rates Kepco notes A3

Moody's Investors Service said it has assigned an A3 rating to Korea Electric Power Corp.'s proposed Regulation S/Rule144A notes issue.

The outlook is negative, reflecting the negative outlook for Korea's A3 sovereign rating.

Moody's said Kepco's A3 rating reflects the company's sound operating performance and credit profile, supported in turn by the continuing growth in domestic electricity demand. The rating also reflects Moody's growing confidence that, while several important issues await finalization under planned industry reforms, the Korean government's careful and considered approach will support Kepco's financial profile.

Moody's said it believes the proposed use of vesting contracts will minimize price volatility when competition is introduced in the future. The rating further recognizes Kepco's strategic role as Korea's only fully-integrated electricity company as well as the government's commitment to both its majority stake and its supportive regulatory framework.

On the other hand, the agency noted, the rating is tempered by Kepco's substantial capex requirements for the next few years and its exposure to any adverse currency moves, given its debt currency profile. However, management efforts to reduce the company's proportion of foreign-currency debt help mitigate such concerns.

Kepco's strong access to the domestic capital and bank markets provides further support to its liquidity profile.

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