Moody’s: UK Energy White Paper has no impact on rating approach

London, March 26, 2003 — The UK government’s recently published White Paper on the long-term future of UK energy has not prompted any change in either Moody’s Investors Service’s approach to rating regulated and unregulated energy companies in the UK or the agency’s views on the sector’s general risk profile, Moody’s says in a new Special Comment.

Moody’s believes that, while the paper reconfirms the government’s commitment to the primacy of competitive markets, it leaves unanswered various questions relating to its attitude to and acceptance of some of the possible consequences of this principle.

“The White Paper sets out the government’s goals for UK energy policy but indicates few specific actions to be adopted at this stage and thus has no immediate impact on Moody’s rating of UK utilities or energy companies,” explains Chetan Modi, Senior Vice-President and author of the report.

Moody’s will continue to focus on the medium-term cashflow and (adjusted) debt position of each company that it rates, factoring in what can reasonably be anticipated in terms of industry trends. Companies that embark on significant capital expenditure, particularly for unregulated businesses, could come under ratings pressure, even if such investments are consistent with the goals of the White Paper.

Moody’s also notes that it does not expect the level of political or regulatory risk to diminish in the UK energy sector, although it may manifest itself in different ways that have yet to be seen.

The report is entitled “UK Energy White Paper: No Change In Moody’s Rating Approach But Unresolved Issues Relating To Government’s Restated Faith In Primacy Of Competitive Markets”.