S&P Global Ratings has withdrawn the ratings of state-led National Power Corp. (Napocor) at the request of the company, the firm said on Thursday, while affirming with a positive outlook the rating of another government energy entity Power Sector Assets & Liabilities Management Corp. (PSALM).
“The outlook on the long-term rating was positive at the time of the withdrawal,” S&P Global said about Napocor, which oversees the government’s small power utilities group.
“At the time of the withdrawal, the rating on Napocor reflected the company’s status as a government-related entity of the Philippines (BBB/Positive/A-2). We equalized the ratings on Napocor with those on the sovereign, based on our assessment of an almost certain likelihood of extraordinary government support to the entity,” the firm said.
Separately, S&P Global said it had affirmed the ‘BBB’ rating of PSALM, which manages the government’s energy-related assets ahead of their eventual sale to the private sector.
“The outlook on the rating is positive,” it said.
“We affirmed the rating on PSALM to reflect our opinion of an almost certain likelihood that the Philippines (BBB/Positive/A-2) government would provide timely extraordinary support to PSALM in the event of financial distress. Therefore, the rating on the government-owned PSALM is equalized with that of the sovereign,” the firm said.
The certainty on government’s support for PSALM was based on the agency’s characteristics, including its “critical role in implementing the Philippines government’s reforms to restructure and liberalize the country’s power sector.”
“The government has also committed to assume all remaining assets and liabilities of PSALM after 25 years from its creation in 2001. There are also cross-default triggers on the government’s external indebtedness. We do not assign a stand-alone credit profile to PSALM because the likelihood of government support is almost certain, and we do not believe that this support is subject to transition risk. PSALM implements and executes a strategic reform program on behalf of the government, from which it is difficult to distinguish,” S&P Global said. — Victor V. Saulon
