...August 13, 2020 SINGAPORE (S&P Global Ratings) Aug. 13, 2020--A downward adjustment in Guangdong province's on-grid gas power tariffs is moderately credit negative for Guangdong Energy Group Co. Ltd. (GEG: A-/Stable/--). We estimate that annual EBITDA will decline by about 5%, or by Chinese renminbi (RMB) 600 million-RMB700 million in 2021 and onwards. The decline in 2020 will be moderate, at about RMB100 million, because the new tariff excludes this year's annual contracted volumes. We don't think the profit decline will move the needle on GEG's credit ratios, which remain comfortably above our threshold for a ratings downgrade. The tariff cuts will not likely lead to profit losses, given the prevailing prices for liquefied natural gas (LNG) are lower than GEG's new tariff derived break-even prices. GEG's gas-power plants have benefited from the year-to-date declines in LNG spot prices as well as lower-cost supply from a long-term contract for Australian LNG imports. In the first six months,...
