S Korea KHNP wins S&P investment status on strong cash flows

(ADPnews) - Sep 2, 2010 - S&P has rated into investment territory the planned debt issue of Korea Hydro & Nuclear Power (KHNP) to reflect its stable cash flow and supportive nuclear power regulations as well as its pivotal role for South Korea's electricity supply.

KHNP, the only nuclear power plant operator in the country, will issue senior unsecured notes of an unspecified amount within its USD-2-billion (EUR 1.6bn) global medium-term note programme.

The proposed bond won an A rating today, the same as the long-term ratings of the issuer and its parent, Korea Electric Power Corp, or KEPCO, which speaks of "strong" debt protection parameters.

The planned debt landed an A1 rating from Moody's, which is four steps below the top of its investment scale.

The strong cash flow generation of KHNP, which has underpinned its strong creditworthiness, is driven by its competitive costs helped by the government backing and favourable laws for nuclear power generation, which made 35% of the nation's electricity supply in 2009 and is set to grow to 48% by 2022, the rating service noted.

However, the company's sizable capital outlays for putting new nuclear units onstream as well as risks associated with capacity expansion, environmental and nuclear safety issues are major rating concerns that could somewhat weaken its strong ability to meet financial commitments, the agency added.

The "stable" outlook on KHNP mirrors the outlook on its 100% owner. As the rater views the nuclear operator and its parent KEPCO as bearing the same credit quality and has therefore aligned their ratings, any rating revision on KEPCO will bring the same move on KHNP.

(USD 1.00 = EUR 0.782)
Rating agency website: www.standardandpoors.com

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