Moody's: APAC Power Sector To Remain Stable In 2021

KUALA LUMPUR, Dec 9 (Bernama) -- Moody's Investors Service expects the power sector in the Asia Pacific (APAC) to remain stable in 2021, as it has been since 2009, amid stabilising cash flows. In a statement Wednesday, it said most rated issuers' cash flows will improve or stabilise supported by power demand recovery or manageable cost pass-through mechanisms. Moody’s said the gradual pace of regulatory change and a manageable transition to a low carbon economy underpinned its outlook for the APAC power sector in 2021. “While the sector faced challenges this year as a result of the pandemic, the companies have been manageable overall and we expect broadly supportive business conditions across the region as economies recover," said vice president and senior credit officer, Boris Kan. He said in China, power demand recovery and falling interest rates will offset likely tariff declines as a result of increased market liberalisation, but there will be delays in subsidy payments for renewable energy operators. Meanwhile, Australia's regulated utilities remain transparent and predictable but unregulated utilities will face ongoing challenges from policy uncertainty and price volatility. In Japan, further decline in the utilities' market share from the retail competition will be limited and the power companies will maintain leading positions in their home markets, but growing overseas investments will increase their business risk and capital spending in the long term. In addition, Korea’s newly commissioned power plants, low fuel costs and improving nuclear power utilisation will offset delays in the pass-through of fuel and environmental compliance costs. India is the only market with a negative power sector outlook due to weak power demand, additional payment delays by state-owned distribution companies and policy actions aimed at reducing stress for end-users. “At a macro level, most countries that have announced sector reforms will change their regulations gradually, which will support cash flow stability. “Supportive government policies and increased cost competitiveness will continue to support the region's renewable energy growth in the long term, but delays in the collection of subsidies or tariffs still pose challenges,” he said. Kan said although the coal-driven power generators' cash flows will weaken and capital spending on renewable energy will grow given the move to a low carbon economy, these risks are manageable in the near team as coal power will remain important for the region. The sustained low-interest-rate environment will also be positive for power utilities by lowering their cost of funding. -- BERNAMA