Singapore Power Ltd.

The WACC of 5.76% in relation to SP PowerAssets Ltd. (SPPA) and 6% for PowerGas Ltd. from the previous regulatory period has been extended to fiscal 2021 as the regulator together with SingPower's shareholder, Temasek Holdings (Private) Ltd. work on a holistic review of the WACC framework. The weakness in fiscal 2021 is primarily due to SingPower deferring price increases for the electricity and gas networks, amounting to Singapore dollar (S$) 346 million. SingPower deferred these increases in its network cost in fiscal 2021, in support of the government's measures following the COVID-19 pandemic. However, we expect SingPower to recover these one-time deferred grid charges over the remaining regulatory period ending March 2025. The positive outlook on SingPower reflects the

...Tariff reset will moderate metrics, but Singapore Power Ltd.'s (SingPower) financial profile will remain comfortably above our upside rating trigger. SingPower has headroom to withstand a lower anticipated WACC from April 2021 for the remaining regulatory years ending March 2025. We estimate SingPower's ratio of funds from operations (FFO) to debt to remain at 36%-38% over the next two fiscal years ending March 2022 (fiscal 2022), from 46% in fiscal 2020 due to the likely drop in the WACC, which we estimate to be about 5% for the group given the lower interest rate environment. However, the actual impact will depend on the parameters of the final WACC decision expected by March 2021. The final WACC decision would provide cash flow visibility for the remaining four years in the current regulatory period. The WACC of 5.76% in relation to SP PowerAssets Ltd. (SPPA) and 6% for PowerGas Ltd. from the previous regulatory period has been extended to fiscal 2021 as the regulator together with SingPower's...

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