Moody’s Investors Service also upgraded its debt rating for the Power Sector Assets and Liabilities Management Corporation (PSALM) after announcing a similar upgrade on the country’s sovereign rating.
PSALM is the government agency tasked to privatize state-owned power assets.
The issuer and senior unsecured bond ratings score of the government agency were raised from Baa3 to Baa2 with a stable outlook, matching the new credit rating for the country’s long-term foreign-currency and local-currency debt.
“PSALM’s ratings are underpinned by its distinct policy role and close integration with the government,” said Mic Kang, a Moody’s vice president and senior analyst.
In particular, Moody’s noted PSALM’s policy role to restructure and reform the country’s power sector, and the government’s obligation to assume any remaining assets and liabilities at the end of PSALM’s 25-year corporate life.
“The government’s strong commitment to PSALM will likely remain intact, given its unconditional and irrevocable guarantees for debt issued by PSALM and transferred from National Power Corporation,” Kang added.
National Power Corporation (Baa2 stable) has transferred more than 99 percent of its rated US dollar bonds to PSALM, including $300 million due in 2028 and $160 million due in 2016.
Moody’s pointed out that future upgrades or downgrades of the sovereign rating could result in similar action on PSALM’s ratings.
Likewise, any change in PSALM’s policy role — a scenario Kang characterized as “unlikely” — could pressure the ratings.
PSALM, wholly owned and controlled by the Philippine government, was established in 2001 to take ownership of and manage all generation-related assets, liabilities, contracts with independent power producers, real estate and other disposable assets of NPC, including the National Transmission Corporation, and to privatize and sell those assets to liquidate NPC’s financial obligations.