September 17, 2012 / 8:38 AM / 5 years ago

TEXT-S&P raises ratings on nine Korean corporate GREs

At the same time, we raised to 'A+' from 'A' the long-term foreign and local currency credit ratings on four GRE utilities: Korea Electric Power Corp. (KEPCO), Korea Gas Corp., Korea Water Resources Corp., and Korea Resources Corp., as well as six subsidiaries of KEPCO: Korea Hydro & Nuclear Power Co. Ltd., Korea East-West Power Co. Ltd., Korea South East Power Co. Ltd. , Korea Midland Power Co. Ltd., Korea Southern Power Co. Ltd., and Korea Western Power Co. Ltd. The outlooks on the long-term ratings are stable. In addition, we raised to 'A+' from 'A' the long-term foreign currency credit ratings on a further two GREs--Korea Railroad Corp. and Korea Expressway Corp. --while keeping the local currency credit ratings on the entities unchanged at 'A+'. The outlooks on the long-term ratings are stable.

The ratings on these six GREs reflect our opinion that there is an extremely high likelihood of the government of Korea providing the entities with timely and sufficient extraordinary support in the event they were to experience financial distress. We still view their ratings to be very close to the ratings on the sovereign given their integral link to or critical role for the government--but not equalized. The ratings could deviate further from the sovereign ratings if we were to lower the stand-alone credit profiles on the entities to the 'B' rating category.

The 'A+' foreign and local currency credit ratings on the six subsidiaries of KEPCO reflect the equalization of the ratings with those on KEPCO. In our view, the subsidiaries' creditworthiness correlates highly with that of KEPCO, through integration of their businesses, a price-setting mechanism, and KEPCO's 100% ownership of the subsidiaries. The subsidiaries' operations depend highly on KEPCO, which buys 100% of their electric power.

In our view, the Korean government has strong willingness and capacity to support these GREs in the event they were to face financial distress. The strong ties between the Korean GREs and the government make the ratings on the sovereign a key driver for the ratings on the GREs. Any further rating action on the sovereign is likely to result in similar action on the Korean GREs.

RATINGS LIST

To From

Korea Land and Housing Corp.

Foreign currency A+/Stable/-- A/Stable/--

Local currency AA-/Stable/-- A+/Stable/--

Korea Rail Network Authority

Foreign currency A+/Stable/-- A/Stable/--

Local currency AA-/Stable/-- A+/Stable/--

Korea National Oil Corp.

Foreign currency A+/Stable/-- A/Stable/--

Local currency AA-/Stable/-- A+/Stable/--

Korea Railroad Corp.

Foreign currency A+/Stable/A-1 A/Stable/A-1

Local currency A+/Stable/A-1 A+/Stable/A-1

Korea Expressway Corp.

Foreign currency A+/Stable/-- A/Stable/--

Local currency A+/Stable/-- A+/Stable/--

Korea Electric Power Corp.

Foreign/Local currency A+/Stable/A-1 A/Stable/A-1

Korea Gas Corp.

Foreign/Local currency A+/Stable/A-1 A/Stable/A-1

Korea Water Resources Corp.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea Resources Corp.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea Hydro & Nuclear Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea East-West Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea South East Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea Midland Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea Southern Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

Korea Western Power Co. Ltd.

Foreign/Local currency A+/Stable/-- A/Stable/--

RELATED CRITERIA AND RESEARCH

Republic of Korea Long-Term Ratings Raised To 'A+/AA-' On Assessment Of Reduced Geopolitical Risks; Outlook Stable, Sept. 14, 2012

2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010

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