Tokyo Electric Power Company Holdings Inc.

The stable outlook reflects our view that: The TEPCO Holdings group has stabilized its self-financing capability through its growing record of public bond offerings over the past two years; and The group will likely maintain stable business operations despite severe competition following market liberalization, and continue to generate relatively stable profits and cash flow for the next year or two. For us to consider upgrading the TEPCO Holdings group, it would need to further improve the stability of its profits and cash flow by making itself less sensitive to external factors. We believe restarting the Kashiwazaki-Kariwa nuclear reactors could produce such a scenario. We would also consider an upgrade if we saw a higher likelihood of a continuous and substantial

...We see little likelihood of substantial improvement in Tokyo Electric Power Company Holdings Inc.'s debt ratios, given its considerable debt related to the Fukushima nuclear disaster. The company will continue paying special contributions to the government for an extended period to compensate for damage associated with the disaster, and it remains exposed to litigation risk and a large amount of contingent and off-balance sheet liabilities. S&P Global Ratings believes a substantial improvement in operating cash flow is unlikely over the next two to three years, given the impact of the full liberalization of retail electricity sales and the company's contributions to the Fukushima decommissioning fund. We also expect its capital expenditure to remain high, at about Ñ600 billion, over the same period. Accordingly, we believe the group's free operating cash flow (FOCF) is likely to remain low and its debt burden remain heavy. We have incorporated the aforementioned off-balance sheet liabilities...

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