The forecast remains gloomy for the country's power, gas and water companies.
Several factors will harm the credit quality of New Zealand's power and utility sector this year, ratings agency Fitch said today.
The factors include adverse regulatory determinations, sizeable capital expenditure on transmission projects and tighter economic
conditions.
Fitch energy and utilities team associate director Sajal Kishore said Fitch's credit outlook for the sector continued to be negative, as it had been for the past few years.
"Regulatory decisions made in 2008 were broadly negative, although the agency welcomes legislative changes which should reduce future regulatory risk," he said.
"In addition, the approval of pending transmission network projects will result in a deterioration of Transpower's credit profile."
In a new report, Fitch noted that unfavourable regulatory tariff adjustment decisions announced in 2008 would lead to the deterioration in the credit profiles of some regulated entities.
But it expected the Commerce Amendment Act 2008 to lower regulatory risk by providing greater transparency and certainty of earnings.
That should reduce the risk of negative tariff reviews in the future, and stabilise the regulated utilities' regulatory risks in the long term.
"The NZ power and utility companies will face increased funding costs but expected to remain relatively well-placed to manage their refinance risks and liquidity in 2009, especially those with regulated revenues," Kishore said.
- NZPA
