[ET Net News Agency, 15 June 2018] S&P Global Ratings raised its long-term issuer
credit rating on China Resources Gas Group Ltd. (01093) to 'A-' from 'BBB+'. The outlook
is stable.
The credit rating agency raised the rating because it expects CR Gas to continue to have
a strong operating performance and improve its financial performance over the next 12-24
months. The company's rapid growth in gas sales volume, stable margin, and disciplined
capital spending will support the improvement.
S&P expects CR Gas to maintain financial discipline while pursuing growth such that the
ratio of funds from operations (FFO) to debt remains at 60%-70% in 2018-2020. The ratio
was 61% in 2017, supported by a robust 11% growth in EBITDA and repayment of HK$1 billion
in debt.
It believes the company's operating cash flow can satisfy its capital spending
requirements, and its free operating cash flow would remain positive over 2018-2020. S&P
believes that CR Gas will continue to operate under an evolving regulatory regime but with
better transparency in the next two to three years.
Following the central government's "Opinion on regulating city gas distribution sector"
in June 2017, local governments have gradually formulated provincial guidance in the first
half of 2018. Under the new regime, the permitted return on gas sales is set at a maximum
of 7% of approved assets. The new regulations do not include connection fees. Currently,
connection fees make up at least a third of the cash flows and profit of city gas firms.
(KL)