S&P boosts Power Finance to BBB-

Standard & Poor's said it raised its long-term foreign- and local-currency issuer credit ratings on Power Finance Corp. to BBB- from BB+.

The outlook is stable.

The changes ensue from the upgrade in the ratings of the Republic of India to BBB-/stable/A-3.

The ratings are supported by strong government support, good capitalization and profitability, S&P said. The ratings derive support from its sole owner, the government of India, because of its role as the main government agency for financing the electricity sector, the agency said. Given the importance of the sector, S&P said it believes the Indian government is likely to provide funding should Power Finance encounter difficulty in servicing its debt obligations.

The ratings are constrained by weak asset quality and high asset concentration, the agency added. State governments and their electricity utilities have poor creditworthiness, the agency said. Utilities consistently report operating losses and often face cash flow difficulties, S&P said.

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