Mixed sentiments on rising gas prices

CEYLON TODAY | Published: 2:00 AM Nov 25 2021

Fitch Ratings expects a mixed performance for our rated APAC gas producers and major energy and utilities (E&U) importers from recent record-high global gas prices. However, overall credit improvement or deterioration among rated issuers should remain largely within the headroom of their respective ratings, or standalone credit profiles in the case of Government-related Entities (GREs). In general, rated APAC issuers’ gas contracts are still tied to long-term crudelinked contracts, with smaller exposure to spot liquefied natural gas (LNG), which has helped to moderate volatility in performance. 

Net gas exporters in Australia and Malaysia should benefit from rising gas export revenue. By contrast, maintaining powertariff stability remains a Government priority among countries which rely on imports for power and heating purposes, which may prevent full cost pass-through among importing GREs such as those in China. Furthermore, stronger-than-expected gas consumption in China, if winter conditions are more severe, would also increase the country’s exposure to spot gas. 

Countries with established cost passthrough mechanisms such as South Korea and Taiwan-rated utility companies would be largely shielded under established mechanisms. However, Fitch believes Government intervention may still prevent a full pass-through on a timely basis. Meanwhile, Australia, Indonesia and Vietnam are insulated from global gas-price volatility as they rely on domestic gas production, with minimal exposure to gas imports.

CEYLON TODAY | Published: 2:00 AM Nov 25 2021

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