State Grid Corp. of China

The stable outlook on SGCC reflects our stable outlook on the sovereign credit rating on China. Both ratings will move in tandem because of our assessment of an extremely high likelihood of support from the Chinese central government to the company. We expect SGCC to preserve its margins through stable T&D tariffs amid moderate growth in power demand in China. Meanwhile, we believe power sector reforms in China, while evolving, are likely to have long-term positive credit implications for SGCC. The stand-alone credit profile is therefore likely to remain stable for the next 24 months, at least. We will lower the rating on SGCC if we downgrade the sovereign, or, in a very remote scenario, we assess that the likelihood

...Dominant market position in China. State Grid Corp. of China (SGCC) transmitted and distributed about 62% of total power consumption in China as of end 2018. Its market share stayed steadily above 60%, while the second-largest power grid company, China Southern Power Grid, contributed about 14%. We expect SGCC's market position to sustain in the future. Evolving power sector reform positive to SGCC's regulatory regime.China's sector reform in power transmission and distribution (T&D) has extended into inter-regional and district level grid networks following the completion at provincial level in 2017. We expect the regulatory regime for grid operators will improve further because of the experience gained from the first round of regulatory cycle over the past three years and the government's continued effort in enhancing transparency and market reform of the power sector. Operating cash flow remains strong. We believe the company will find it tough to maintain its profit margin given the...

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