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Fitch downgrades state-run Chinese power construction firm; outlook stable

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Fitch downgrades state-run Chinese power construction firm; outlook stable

Fitch Ratings downgraded Power Construction Corporation of China Ltd.'s long-term foreign-currency issuer default rating, its senior unsecured rating, and the ratings on its medium-term note and senior perpetual securities program to BBB+ from A- with a stable outlook.

The rating agency also downgraded the ratings on the senior perpetual capital securities issued by subsidiaries Dianjian Haiyu Ltd., Leader Goal International Ltd. and Dianjian International Finance Ltd. to BBB from BBB+, one notch below the parent company's issuer default rating, in accordance with Fitch criteria.

The downgrade was due to the lowering of PCCC's scoring under Fitch's government-related entities criteria, which take into account a company's socio-political importance.

Fitch said PCCC's socio-political impact has weakened in recent years amid a cutback in China's hydropower investment and PCCC's continued efforts in diversifying into nonpower engineering and construction businesses.

"PCCC's business has become more commercially oriented, with more substitutes for its services. In addition, we believe the government support received by PCCC has had moderate impact on its financial stability and viability as its financial profile has remained at a weaker level for an extended period," Fitch said.

According to the rating agency, PCCC's credit rating might be upgraded with a positive rating action for China and more support from the Chinese government.

On the other hand, further negative action could follow if China's sovereign credit rating is downgraded and government support for the company weakens further.

PCCC had 109.4 billion Chinese yuan in short-term debt in 2018, which Fitch said can be sufficiently covered by 91.3 billion yuan of available cash and 460.6 billion yuan of undrawn credit facilities.

As of Sept. 9, US$1 was equivalent to 7.12 Chinese yuan.