November 23, 2021 (MLN): Recent record-high global gas prices is expected to result in a mixed performance among rated gas producers and major energy and utilities importers within APAC, says Fitch Ratings in its latest report issued on Monday.
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), it added.
As per the report, in general, rated APAC issuers' gas contracts are still tied to long-term crude-linked contracts, with smaller exposure to spot liquefied natural gas (LNG), which has helped to moderate volatility in performance.
Spot gas prices should remain high until the end of the heating season, as prices rose to over USD56/ mmbtu even before entering the peak season. Fitch views exposure to escalating spot gas prices as more muted among rated gas producers, key importers and power companies in APAC, as most production or volume
consumed is locked under long-term contracts.
Net gas exporters in Australia and Malaysia should benefit from rising gas export revenue. By contrast, maintaining power-tariff 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, the report added.
Countries with established cost pass-through 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.
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