Criteria for Rating Power Utilities – Revised Methodology Published
Johannesburg, 31 October 2017—Global Credit Ratings (“GCR”) has today published an updated Criteria for Rating Power Utilities (“The Criteria”). This Criteria replaces the version published in October 2016.
The Criteria is intended to illustrate the rating guidelines that GCR follows when according ratings to a Power Utility. The provision of electricity, while not considered crucial to sustaining life (unlike water services), is a critical component in enhancing the quality of life and supporting economic growth. In this respect, the government has an important role to play in ensuring sufficient electricity is generated and provided to users. Thus, Power Utilities tend to exhibit characteristics of both private and public sector institutions. On the one hand, Power Utilities are usually partially or wholly owned by the National Government of a particular country, or fall under some regional jurisdiction. Even where the entity may have been privatised, the provision of electricity and the pricing thereof tends to be highly regulated. On the other hand, Power Utilities tend to operate as corporatised legal entities, having a Board of Directors and management structure similar to that of private sector entities, as well as a mandate to generate profits. Accordingly, the rating approach taken by GCR combines elements from both GCR’s Criteria for Rating Public Entities and GCR’s Criteria for Rating Corporate Entities.
There are no significant changes to this Criteria and its implementation will not have an impact on any existing ratings. Going forward, this Criteria will be applied to all ratings of Power Utilities.
For a more comprehensive discussion of GCR’s rating philosophy users are advised to read the following related methodologies in conjunction with this criteria.
Global Master Criteria for rating Public Entities, updated February 2017
Global Master Criteria for rating Corporate Entities, updated February 2017
Sector Head: Corporate & Public Sector Debt Ratings
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