Exposure to coronavirus disruption low for majority of APAC infrastructure companies

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The airport sector is highly exposed to the ongoing travel restrictions, which have resulted in unprecedented declines in passenger traffic.
APRIL 09, 2020 - 2:17 PM

Of the nearly 200 rated infrastructure issuers in Asia-Pacific, 68 per cent have low exposure to disruption from the coronavirus, 23 per cent have moderate exposure, and 9 per cent have high exposure said Moody's Investors Service in a sector comment released on Thursday. 

Of those with high exposure, most are regional airports, and toll roads in China. In particular, the rated Asia-Pacific airport sector is highly exposed to global coronavirus containment measures and travel restrictions which have resulted in unprecedented declines in passenger traffic with uncertain recovery trajectory. 

Weakened traffic volumes for the toll road sector in China also continues to dent issuer's revenue and strain their credit metrics, in the absence of government compensation. 

Korean transportation companies - Korea Railroad Corporation (Aa2 stable) and Korea Expressway Corporation (Aa2 stable) – will also suffer from the spread of the virus and slowing economy.

Separately, while reducing trade volumes will put pressure on the port sector, most have credit headroom and manageable liquidity.

"We assume a gradual recovery commencing in the second half of 2020 but throughput will remain at a lower level than before the outbreak and this recovery is threatened by weakening global economy," said the ratings agency.

"Issuers with some upstream oil operations such as China Oil and Gas Group Limited (Ba2 stable) are more vulnerable to the exposure amid a weak oil price environment."

The remaining 68 per cent of issuers with low exposure are in sectors that provide essential goods and services or are protected from volume risk; and project finance or public-private partnership structures, where cash flow is non-volume linked. 

“That said, these sectors are not completely immune from the disruption,” said Ralph Ng, a Moody's assistant vice president and analyst. “For example,power utilities will likely see demand drop as business and industrial activity declines, while some of the regulated utilities may see returns drop due to low interest rates.”