Moody's rates Korea South-East Power notes A2

Moody's Investors Service said it assigned an A2 senior unsecured foreign-currency rating to Korea South-East Power Co. Ltd.'s proposed 10-year $300 million notes with a positive outlook in line with the positive outlook of Korea's sovereign ratings. At the same time, Moody's affirmed the company's A1 local-currency issuer rating with a stable outlook.

The proceeds from the notes will be used for general corporate purposes, including the purchase of imported fuels.

Moody's said the ratings are supported by the company's 100% ownership by Korea Electric Power Corp., which is in turn owned by the South Korean government, and by the low likelihood of material reform in the Korean power sector. Under the current cost-based pool system, Korea South-East can largely pass on its increased costs to Korea Electric, thereby ensuring a stable earnings profile.

At the same time, the ratings reflect the company's large capital expenditure program, which will require additional debt financing, and convertibility risk, which is the likelihood that the Korean government may declare a debt moratorium to counter a foreign-currency crisis.

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