Global Criteria for Rating Power Utilities – New Methodology Published for Consultation
Johannesburg, 23 September 2016—Global Credit Ratings (“GCR”) has published its draft Global Criteria for Rating Power Utilities for public consultation and welcomes feedback from market participants in respect of the methodology to be applied (this methodology can be accessed above).
This is a new criteria issued by GCR and 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.
For a more comprehensive discussion of GCR’s rating philosophy users are advised to read the following related methodologies in conjunction with this criteria (available at www.globalratings.net)
• Global Master Criteria for rating Public Entities, updated February 2016
• Global Master Criteria for rating Corporate Entities, updated February 2016
All submissions should be received no later than 23 October 2016 and GCR expects to release the final methodology by 31 October 2016. Submissions should be sent to firstname.lastname@example.org.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.