Fitch may cut Singapore Power

Fitch Ratings said it placed the ratings of Singapore Power Ltd., SP PowerAssets Ltd. and Singapore Power Ltd.'s Australian entities on Rating Watch negative following Alinta Ltd.'s announcement that it has signed an agreement under which a consortium of Babcock & Brown and Singapore Power International would acquire Alinta for A$7.5 billion.

The entities and ratings affected include Singapore Power's A+ long-term foreign- and local-currency issuer default rating, F1+ short-term rating and AA- senior unsecured rating, SP PowerAssets Ltd.'s A+ long-term foreign- and local-currency issuer default rating and F1+ short-term rating, SP AusNet's BBB+ issuer default rating, SPI PowerNet Pty Ltd's BBB+ issuer default rating, SPI Australia Holdings LP's BBB+ issuer default rating, A- senior unsecured rating, SPI Electricity Pty Ltd's BBB+ issuer default rating, A- senior unsecured rating, SPI Electricity & Gas Australia Holdings Pty Ltd.'s BBB+ issuer default rating and A- senior unsecured rating.

SP AusNet's acquisition of Alinta assets from Singapore Power falls within their mandate and would provide considerable asset and regulatory diversification for investors, Fitch said.

This is tempered by the fact that any transaction is unlikely to be funded at lower levels of leverage than that found in the existing SP AusNet structure, the agency added. The agency also noted the likely negative effects of the acquisition on Singapore Power's credit metrics at the group level. A largely debt-funded acquisition would give a material adverse effect on the credit profile of Singapore Power, given the size of the acquisition, Fitch said.

However, the downward impact on the credit metrics will be mitigated if Singapore Power successfully sells the assets to SP AusNet, of which it retains a 51% stake, the agency added.

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