TEXT-S&P:Korea-based KEWP's proposed bonds rated 'A'

Mon Jul 9, 2012 5:13am EDT

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(The following statement was released by the rating agency)

July 09 - Standard & Poor's Ratings Services today assigned its 'A' rating to Korea East-West Power Co. Ltd.'s (KEWP; A/Stable/--) proposed senior unsecured bonds. The company plans to use proceeds from the bond issuance for refinancing and capital spending. The rating on the bonds is subject to our review of final documentation.

Standard & Poor's Ratings Services has equalized the long-term corporate credit rating on KEWP with the rating on Korea Electric Power Corp. (KEPCO; A/Stable/A-1), which wholly owns KEWP. The rating on KEWP also reflects its importance to the national electricity supply as well as a reduction in the risk that the government of the Republic of Korea (local currency A+/Stable/A-1; foreign currency A/Stable/A-1) will privatize it in the foreseeable future.

We assess the stand-alone credit profile (SACP) for KEWP to be 'bbb'. The SACP reflects our view that KEWP has a strong business risk profile--based on its solid market position and significant financial risk profile--that takes into account its need to make significant capital expenditures to meet growing demand for electricity.

The stable outlook on KEWP reflects the outlook on KEPCO because we have equalized the ratings on KEWP with the ratings on its parent company. As such, we would lower the ratings on KEWP if we lowered the ratings on KEPCO. Similarly, we would raise the ratings on KEWP if we raised the ratings on KEPCO.

On the other hand, if the link between KEWP and KEPCO weakened such that KEPCO were to reduce its ownership in KEWP, the ratings on KEWP may diverge from the ratings on KEPCO and we would more likely than not lower them from the current level.

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