Standard & Poor’s Ratings Services (S&P) yesterday maintained Taiwan Power Co’s (Taipower, 台電) credit rating, one day after the Chinese Nationalist Party (KMT) and President Ma Ying-jeou (馬英九) agreed to halt the construction of the nearly completed Fourth Nuclear Power Plant in New Taipei City’s Gongliao District (貢寮).
However, the state-run utility said the cost of halting construction of the controversial power plant could run into billions of dollars, with potential claims for breach of contract by domestic and foreign suppliers estimated at NT$10 billion (US$330 million).
Taipower’s “A+” long-term rating was retained by S&P, which is the fifth-ranked rating under the international agency’s credit metric.
However, the utility’s CreditWatch status also stayed unchanged — at “negative” — meaning that a lowering of the rating may be possible.
“Ratings and outlook on Taiwan Power Co are not affected by the halted construction of a Fourth Nuclear Power Plant ,” S&P said in a statement yesterday. “The announcement that the project’s future would be put on hold before a public referendum is held is not materially different from the government’s previous statement regarding the nuclear project.”
Taipower has spent NT$283 billion on the project, which has dragged on for 15 years, but has yet to generate any electricity. The company has an accumulated loss of NT$208 billion.
Taipower chairman Hwang Jung-chiou (黃重球) yesterday said that the cost of reactivating the plant after shutting it down is also hard to estimate, adding that a nuclear power plant in the US budgeted US$3 billion to start up the facility after it had been idle for 10 years.
While Taipower could increase prices to cover its costs, the company’s hands are tied, as an electricity rate adjustment is not for it alone to decide and any change in electricity rates must be approved by the Legislative Yuan, which is known for strongly opposing rate hikes.
As a result, S&P said the lingering uncertainty regarding the Fourth Nuclear Power Plant could have a negative effect on Taipower’s credit rating going forward.
“We also believe that a decision to abandon the project entirely could stress Taipower’s financial profile and substantially weaken its credit profile without timely and sufficient direct assistance from the Taiwanese government,” S&P said. “Such an outcome would likely result in a multiple notch downgrade of Taipower.”
Additional reporting by CNA
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