China General Nuclear Power Corp. Upgraded To 'A' On Enhanced Role For The Government; Outlook Stable
- The credit profile of China General Nuclear Power Corp. (CGNPC) benefits from an increased likelihood of extraordinary support from the central government, given the company's critical role in driving China's decarbonization targets.
- We revised CGNPC's stand-alone credit profile (SACP) upward to 'bbb-'. This reflects ongoing policy support on project approvals, strong market access in the domestic credit market, and steady progress of project pipelines.
- We raised our long-term issuer credit rating on the company to 'A' from 'A-'. At the same time, we raised the issue rating on the US$600 million senior unsecured notes that CGNPC guarantees to 'A' from 'A-', on par with the issuer credit rating.
- The stable outlook on the issuer credit rating for the next 24 months reflects that on the sovereign rating on China. The ratings on CGNPC will move in tandem with those on the government.
SINGAPORE (S&P Global Ratings) April 7, 2025--S&P Global Ratings today took the rating actions listed above.
We now see an extremely high likelihood of extraordinary support from the central government of China for CGNPC in the event of financial distress. This reflects clarity on the government's commitment to nuclear expansion, backed by a slate of project approvals and a policy stance to accelerate development of coastal nuclear power plants. It also indicates our view that the company will take a critical role in leading the nuclear power market to drive China's decarbonization efforts.
The government's support for nuclear power reflects its growing recognition of nuclear energy as a crucial baseload source for a net-zero economy and a means to enhance energy security through diversification. Nuclear energy is cleaner than coal and gas, with zero operational emissions, and offers more stable output than weather-dependent renewables. Its levelized cost of electricity (i.e., average lifetime cost of generation for a power plant) is also lower than coal, gas, and hydro power, facilitating a cost-effective energy transition.
Long-term investments in nuclear technology, including advancements in nuclear fusion and the use of small modular reactors, will expand energy options. Nuclear energy applications can also widen to provide steam and heat for industries, clean heating for homes, and saltwater desalination.
Against this backdrop, CGNPC holds an irreplaceable position in China's nuclear market. This is supported by the high barriers to entry, including regulatory complexities, specialized expertise, and significant capital costs.
The company's extensive operational experience and technological expertise anchor its core competitiveness. It is the co-developer of Hualong One, the proprietary Gen III nuclear technology, which has no dependence on imports of technology or equipment. This has high national significance. CGNPC's operating process management is also considered world-leading, based on World Association of Nuclear Operators' annual assessment on performance metrics of pressurized water reactors.
We also consider the implications of a financial default on CGNPC's plant operations. With only four licensed operators having the technical expertise to manage nuclear plants, financial distress could lead to significant disruptions to the company's nuclear power output. This would adversely affect local economies, particularly in coastal provinces where CGNPC's plants are located. This scenario would likely prompt government support, given CGNPC's captive market in coastal provinces like Guangdong and Hong Kong, where it supplies 14% and 25% of power, respectively--amounts that we believe would be difficult to replace quickly.
CGNPC also plays a role in implementing the government's overseas strategies through investments in nuclear and other power assets there. While geopolitical tensions are complicating the company's efforts to export nuclear power, we expect CGNPC's expansion will continue to receive political and diplomatic backing from the Chinese government. The company has also invested in thermal power and renewable projects across 16 countries in Asia, Eastern Europe, and Northern Africa, and is the second largest power producer in Bangladesh and Malaysia.
CGNPC's improved stand-alone credit profile reflects preferential funding access and a track record of constructing and operating its Hualong One reactors. The company's cost of borrowing is declining, benefiting from strong banking relationships with state-owned and policy banks, effective liability management, and favorable bond market access. This helps maintain a stable interest coverage ratio despite rising investments and debt balance.
Following successful deployment of two Hualong One units in Fangchenggang city, construction risks for new projects will likely decline due to improved supply chain and project experience. Fourteen out of CGNPC's 16 units under construction or approved for construction are Hualong One reactors.
CGNPC's has a sufficient financial cushion to absorb rising capital expenditure (capex) and declining tariffs for users. We expect the company's funds from operations (FFO) cash interest coverage to average 3.1x over 2024-2026, above our downside trigger of 2.0x.
This assumes capex will rise to Chinese renminbi (RMB) 80 billion-RMB87 billion over 2024-2026, from RMB71 billion in 2023. We project 40%-50% of the expenditure will be for nuclear power, including seven reactors currently under construction, as well as new construction of two to three units annually in 2025 and 2026.
For nuclear power, tariffs dipped by 2% in 2024 and we forecast a decline of 6% in 2025, in line with tariff trends for coal-fired generation in Guangdong and Guangxi. Volumes priced at market tariffs for CGNPC's nuclear generation will likely account for more than 51% of total generation.
Capacity growth in nuclear and renewables should drive earnings growth, offsetting lower market tariffs. We expect CGNPC's EBITDA to rise by about 5% in 2024 and average 5%-6% growth annually over 2025-2026, primarily driven by rapidly rising domestic wind and solar capacity.
We forecast CGNPC will add 10 gigawatts (GW) to 11 GW of wind and solar energy capacity per year over 2025-2026, at a comparable pace to that in 2024, though rising curtailment risks and more market-driven tariffs will encourage stricter project selection. Net generation on domestic wind and solar will grow by about 18% in 2024 and average 19% per year over 2025-2026, in our assessment.
The stable rating outlook on CGNPC for the next 24 months reflects that on the sovereign credit rating on China. Given an extremely high likelihood of extraordinary government support for the company, our rating will move in tandem with the sovereign rating, as long as CGNPC can maintain an SACP of at least 'bb-'.
We may downgrade CGNPC if we downgrade the sovereign.
We could revise downward our assessment of the SACP by one notch if CGNPC's FFO cash interest coverage remains below 2.0x on a sustained basis. This could stem from one or more of the following factors:
- CGNPC's operating cash flow is well below our expectation, possibly if capacity utilization remains low;
- The company is exposed to heightened competitive pressure under market-based power sales, with material tariff discounts and increased cash flow volatility;
- CGNPC faces significant delays or cost overruns at its nuclear power projects that are under construction;
- The company becomes more aggressive and undertakes more significant debt-funded new projects or investments than we have factored into our base case; or
- CGNPC's overseas expansion faces increasing risks, such as country, regulatory, cash flow, and currency risks.
We could upgrade CGNPC if we upgrade China.
We may revise CGNPC's SACP upward by a notch to 'bbb' if any of the following occurs:
- CGNPC sustains FFO cash interest coverage above 4.0x. This would require the company to make good progress in nuclear projects under construction and maintain prudent management of its capital structure, as indicated by diversified, long-dated, cost-competitive funding channels that would support CGNPC's debt servicing.
- CGNPC's market competitiveness and operational scale significantly improve, as demonstrated by strong performance metrics in its nuclear and renewable projects as new projects are commissioned, along with its ability to maintain relatively stable tariffs in an increasingly market-driven power sector.
Environmental, social, and governance (ESG) credit factors for this change in credit rating/outlook and/or CreditWatch status:
• Environmental - Climate transition risks
Related Criteria
- Criteria | Corporates | General: Sector-Specific Corporate Methodology, April 4, 2024
- Criteria | Corporates | General: Corporate Methodology, Jan. 7, 2024
- Criteria | Corporates | General: Methodology: Management And Governance Credit Factors For Corporate Entities, Jan. 7, 2024
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- General Criteria: Group Rating Methodology, July 1, 2019
- Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019
- Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018
- General Criteria: Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
- Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
- General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
- General Criteria: Methodology: Industry Risk, Nov. 19, 2013
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- General Criteria: Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
Related Research
- Sustainability Insights: Rising Curtailment In China: Power Producers Will Push Past The Pain, Nov. 18, 2024
- Power Sector Update: China Will Keep Its Lead In Global Offshore Wind Additions, Aug. 29, 2024
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/504352. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings referenced herein can be found on S&P Global Ratings' public website at www.spglobal.com/ratings.
European Endorsement Status
Global-scale credit rating(s) issued by S&P Global Ratings' affiliates based in the following jurisdictions [To read more, visit Endorsement of Credit Ratings] have been endorsed into the EU and/or the UK in accordance with the relevant CRA regulations. Note: Endorsements for U.S. Public Finance global-scale credit ratings are done per request. To review the endorsement status by credit rating, visit the spglobal.com/ratings website and search for the rated entity.
| Primary Contact: | Colton Zhou, Singapore 65-6530-6437; colton.zhou@spglobal.com |
| Secondary Contact: | Apple Li, CPA, Hong Kong 852-2533-3512; apple.li@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.