Moody's rates Samchully

Moody's Investors Service said it assigned an A2 local currency issuer rating to Samchully Co. Ltd.

At the same time, Moody's said it assigned an A3 foreign currency issuer rating to Samchully, which is in line with Korea's A3 foreign currency sovereign ceiling. The outlook is stable.

Moody's noted the ratings reflect Samchully's credit strengths, supported by 1) its cost-plus rate of return tariff structure, which allows cost pass-through to end-users with a guaranteed investment return and generates stable cash flow, 2) its strong financial profile and sound liquidity, 3) the positive LNG industry outlook as a result of the supportive regulatory regime, which guarantees a geographical monopoly and exclusive distribution rights for Samchully in its franchised territories and 4) the company's dominant position in the city gas industry, with a high proportion of secured industrial demand.

At the same time, the ratings incorporate credit risks associated with 1) the risk of slowing growth due to an already high penetration rate and associated execution risks over entrance into new LNG-related businesses to counter this slowdown and 2) uncertainty over the company's strategy for other LNG-related business initiatives and the risks of the founding families further investing in non-core businesses through Samchully, partially mitigated by the company's track record of minimal non-core investments and sound corporate governance, the agency said.

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