TEXT-S&P summary: Singapore Power Ltd.

However, the rating on SingPower may come under pressure if the contribution

of the company's international business to the group's cash flows and assets

increases significantly, such that it becomes the key rating driver. This

could be due to SingPower's material expansion in markets and businesses that

we view as being of lesser quality than the T&D business in Singapore. The

Australian business currently contributes about 60% of SingPower's total

EBITDA and the Singapore business contributes the rest. We assess the credit

profile of the group's Australian business to be in the 'bbb' category and

that of the Singapore business to be in the 'a' category.

We believe that there is a "high" likelihood that the government of Singapore

(AAA/Stable/A-1+; axAAA/axA-1+), through SingPower's parent, Temasek Holdings

(Private) Limited (AAA/Stable/A-1+; axAAA/axA-1+), would provide timely and

sufficient extraordinary support to SingPower in the event of financial

distress. However, we believe that government and shareholder support is not

absolute.

We assess the stand-alone credit profile of SingPower to be 'a-'. In

accordance with our criteria for government-related entities, our view of a

"high" likelihood of extraordinary government support is based on our

assessment of the following SingPower characteristics:

-- Its "important" role as the holding company for SPPA, which owns and

maintains Singapore's electricity T&D assets, and SP PowerGrid Ltd., which

manages SPPA's assets; and

-- Its "very strong" link with the government.

We expect SingPower's cash flow adequacy measures to weaken in the next one to

two years as the company undertakes a tunnel project in Singapore to replace

aging underground transmission cables and lay new cables to support the growth

in electricity demand. The project is estimated to cost about Singapore dollar

(S$) 2 billion, and we expect SingPower to fund about 70% of the cost through

borrowings. We estimate SingPower's ratio of funds from operations (FFO) to

debt to drop to 11%-12% for the next two years, compared with about 13% for

the fiscal year ended March 31, 2012.

Nevertheless, SingPower's diverse high-quality cash flow, liability management

efforts, and solid access to financial markets mitigate the impact of the

company's weaker cash flow and profitability measures.

Liquidity

SingPower's liquidity is "adequate," as defined in our criteria. We expect the

company's liquidity sources (including cash, FFO, and credit facilities) to

exceed its uses by at least 1.2x over the next 12 months. Our liquidity

assessment is based on the following factors and assumptions:

-- Cash and cash equivalents and available lines under committed bank

facilities fully cover debt maturities over the next 12 months.

-- EBITDA is predictable, which is supported by a favorable regulatory

framework.

-- We believe net liquidity sources will remain above cash requirements

even if EBITDA declines by 20%.

SingPower has supportive banking relationships and has good access to debt

capital markets in Singapore and Australia.

Outlook

The stable outlook reflects our expectation that SingPower will continue to

have stable cash flows and will pro-actively manage its liabilities in the

next couple of years while pursuing growth investments.

We may lower the rating on SingPower if we lower the likelihood of

extraordinary government support by one category to "moderately high." We

could also downgrade SingPower if its stand-alone credit profile weakens by

one notch to 'bbb+' due to either of the following:

-- SingPower departs significantly from its strategy of staying in its

core T&D business in a stable regulatory environment; or

-- The contribution of SingPower's international businesses to the

group's cash flows and assets increases materially, such that it becomes the

key driver of the rating; or

-- SingPower's cash flow adequacy and liquidity deteriorate, or the

company's tunnel project faces material delays and cost overruns, such that

its FFO-to-debt ratio heads toward 10% or below.

Conversely, while the probability of an upgrade is low, we could raise the

rating if we raise the likelihood of extraordinary support by one category to

"very high" or SingPower's stand-alone credit profile improves by three

notches.

Related Criteria And Research

-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18,

2012

-- Rating Government-Related Entities: Methodology And Assumptions, Dec.

9, 2010

-- Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010

-- Business And Financial Risks In The Investor-Owned Utilities Industry,

Nov. 26, 2008

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Source: http://news.yahoo.com/text-p-summary-singapore-power-ltd-091825372--sector.html

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