Ratings on Shikoku Electric & J-Power lowered to 'A+'

Standard & Poor's lowered its ratings on Shikoku Electric and J-Power to 'A+' from 'AA-'

Continuing uncertainty over regulation of nuclear power in Japan and increasing costs that will affect operating profits and cash flow were the justifications for the ratings.

In addition to increased risks related to the operation of nuclear plants, the downgrade of J-Power also reflects its dependence on the creditworthiness of Japan's electric power companies. Given its debt burden and weaker financial ratios compared with Japanese EPCOs, Standard & Poor,s thinks J-Power's financials continue to be vulnerable to downward pressure on the sector.

Shikoku is the operator of the 'Ikata' nuclear power plant while J-Power is constructing the 'Ohma' nuclear power plant.

Standard & Poor's Ratings Services  lowered its long-term corporate credit and debt ratings on Shikoku Electric Power and J-Power to 'A+' from 'AA-'. At the same time, it lowered the short-term credit rating on Shikoku Electric to 'A-1' from 'A-1+'. The outlook on the long-term corporate credit ratings on both companies remains negative.

In S&P's opinion, Japan's stalled energy strategy following the Fukushima No. 1 nuclear power plant disaster could hurt the credit quality of the nation's electric utilities sector. Continuing uncertainty over regulation of nuclear plants and increasing costs for their operation could hurt Shikoku Electric and J-Power's stable operating profits and cash flow over the next two years.

S&P feels Shikoku Electric will face higher fuel costs to replace nuclear power generation lost due to prolonged shutdowns for safety inspections. It also expect the central government will require Shikoku Electric, J-Power, and other nuclear power plant operators or constructors to contribute to, and share in the cost of, compensation TEPCO will pay to cover damage from the disaster.

The full story is available at Reuters.