Research Update: Guangdong Energy Group 'A-' Rating Affirmed; SACP Revised Down To 'bb+' On Weaker Margin Recovery; Outlook Stable

We believe sustained high fuel prices will continue to weigh on Guangdong Energy Group Co. Ltd.'s (GEG) profitability. A higher increase in fuel costs compared with that in thermal-power tariffs constrains the group's margin recovery. We therefore revised down the China-based utility's stand-alone credit profile (SACP) to 'bb+' from 'bbb-' to reflect sustained pressure on its financial performance. A recovery will hinge on active cost management. On July 1, 2024, S&P Global Ratings affirmed the 'A-' long-term issuer credit rating on GEG because we believe the company will continue to receive extraordinary support from the Guangdong provincial government, given its key role as the only energy platform under the local government that provides energy security. The stable outlook reflects our

...- We believe sustained high fuel prices will continue to weigh on Guangdong Energy Group Co. Ltd.'s (GEG) profitability. A higher increase in fuel costs compared with that in thermal-power tariffs constrains the group's margin recovery. - We therefore revised down the China-based utility's stand-alone credit profile (SACP) to '##+' from '###-' to reflect sustained pressure on its financial performance. A recovery will hinge on active cost management. - On July 1, 2024, S&P Global Ratings affirmed the 'A-' long-term issuer credit rating on GEG because we believe the company will continue to receive extraordinary support from the Guangdong provincial government, given its key role as the only energy platform under the local government that provides energy security. - The stable outlook reflects our expectation that GEG will maintain its leadership position in power supply in Guangdong and generate stable cash flow while maintaining discipline in capital expenditure (capex) deployment over...

Research Update