Moody's: Kepco outlook positive

Moody's Investors Service said it assigned an A2 local currency issuer rating to Korea Electric Power Corp. (Kepco). The outlook is positive.

At the same time, Moody's said it revised the outlook for Kepco's A3 foreign currency debt rating to positive from stable, in line with its local currency rating.

Moody's said the A2 rating reflects Kepco's key credit strengths: 1) strong financial profile; 2) dominant position in the Korean power sector; 3) Moody's confidence that while several important issues await finalization under planned industry reforms, the Korean government's careful and considered approach will support Kepco's ability to maintain a stable credit profile; and 4) the company's sound liquidity and strong access to the domestic bank and capital markets.

At the same time, the rating reflects the following credit challenges: 1) the absence of a transparent and formula-based tariff adjustment mechanism exposes operating performance to rising fuel costs and any depreciation in the Korean Won; 2) substantial capex required to expand generation capacity and upgrade its T&D network; and 3) susceptibility to adverse exchange rate moves as 36% of its debt and 40% of its operating costs are denominated in foreign currencies.

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