Moody's affirms Kepco

Moody's Investors Service said it affirmed the A1 foreign currency senior unsecured debt rating and A1 local currency issuer rating of Korea Electric Power Corp. (Kepco).

The outlook remains stable.

The A1 ratings continue to reflect Moody's view that the company has a baseline credit assessment of five (on a scale of one to 21, where one represents lowest credit risk); the Korean government's A3 local currency rating and positive outlook; Kepco's high dependence, which reflects high exposure to the Korean economy as well as its very close operating and financial proximity to the government; and its high support, reflecting the national importance of Kepco as Korea's only fully integrated electricity utility, a situation which provides a strong incentive for government support.

The ratings also consider the lack of a transparent and formula-based tariff adjustment mechanism, which exposes Kepco's operating performance to rising fuel costs; the need for substantial capex to expand the company's generation capacity and T&D network; and its susceptibility to adverse exchange rate moves as 30% of its debt and 40% of operating costs are denominated in foreign currencies, the agency said.

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