Taipower and PetroChina have reduced their bond issuance scale, and interest costs have been high. A downgrade in their credit ratings will impact PetroChina's gas purchases.

If the credit rating is downgraded, it will impact PetroChina's gas purchases. (Photo by reporter Lin Jinghua)

[Reporter Lin Jinghua/Report from Taipei] Taipower plans to issue 150 billion yuan in corporate bonds this year, and the scale of bond issuance continues to remain high. However, as the interest rate environment has recently heated up, Taipower's latest corporate bond interest rate has returned to the "prefix 2", and the cost of borrowing new money is increasing. Taipower estimates that interest expenses this year will approach 30 billion yuan; China National Petroleum Corporation is also in financial distress. It originally planned to issue 82.5 billion yuan in bonds this year, but the government coordinated the eight major public equity banks to complete the total. 300 billion yuan in project financing, the annual bond issuance scale has been revised down to 32.2 billion yuan, but CNPC’s interest payment this year alone is as high as 13 billion yuan.

In recent years, Taipower has continued to use corporate bonds to finance power construction, working capital and repayment of old debt, and the scale of bond issuance has remained high. Taipower plans to issue 150 billion yuan in corporate bonds this year. As of October, it has issued 5 times, totaling 63.6 billion yuan. On the other hand, about 90.2 billion yuan in corporate bonds have matured this year. While raising new funds, it is facing the pressure of refinancing due to old debt maturities. Large amounts of principal will continue to mature in the next few years. Debt pressure will not be relieved in the short term.

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Taipower's current total long-term and short-term borrowings have exceeded 1.7 trillion yuan, and the interest rate on new corporate bonds has "returned to 2%." For Taipower, which still has a loss of 371.2 billion yuan, interest expenses are fixed and difficult to compress financial costs. Taipower estimates that interest expenses this year will be close to 30 billion yuan, which translates into paying more than 80 million yuan in interest every day.

CNPC also relies on corporate bonds to raise long-term funds. Bond interest rates have also risen in recent years. The interest rate once reached 2% in 2025. This year it has dropped from last year, but it has also risen from 1.6% to 1.8%. CNPC originally planned to issue 82.5 billion yuan in bonds this year, but after the government asked public equity banks to provide 300 billion yuan in project financing, CNPC has used 240 billion yuan of the quota, and the urgency of bond issuance has been reduced. Currently, after CNPC plans to issue another 8.8 billion yuan in the fourth quarter, the annual bond issuance quota will be about 32.2 billion yuan.

Currently, both companies are still supported by AAA (twn) credit ratings, reflecting the status of state-owned enterprises and the importance of energy security. However, the extremely high credit ratings are backed by government guarantees. Once the credit ratings are revised down, their bargaining and negotiation capabilities for procurement will be greatly reduced, and international gas purchases will be burdened. As insurance costs increase sharply, suppliers will require CNPC to provide higher amounts of letters of credit (L/C), deposits or additional bank guarantees. Worse still, if there is another major international war or supply chain is interrupted, CNPC will lose its ability to urgently purchase and flexibly dispatch oil and gas in the spot market.

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