Moody's may downgrade Kepco

Moody's Investors Service said it placed on review for possible downgrade the A1 issuer and senior unsecured debt ratings of Korea Electric Power Corp. and its 100%-owned generation subsidiaries.

The rating action reflects the significant deterioration in Kepco's financial performance in the fourth quarter of 2008, the agency said, adding that such deterioration was a result of Kepco's exposure to contracted high fuel costs and sharp depreciation of the Korean won and happened in spite of a 4.5% tariff increase in November and the KRW 668 billion subsidy from the government.

Moody's said that given the challenging economic environment in South Korea and expected weak electricity demand growth in the near term, pressure remains over Kepco's operating and financial profiles and its ability to support its rating.

At the same time, Kepco's rating continues to incorporate the high likelihood of support in a distressed scenario from the South Korean government in view of the latter's 51% stake in the company and Kepco's strategic importance to the country, the agency said.

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