OREANDA-NEWS. Fitch Ratings has downgraded the Long-Term Local-Currency Issuer Default Ratings (IDRs) of CPC Corporation, Taiwan (CPC) and Taiwan Power Company (Taipower) to 'A+' from 'AA-'. The Outlooks remain Positive. The agency also upgraded the companies' Short-Term Foreign-Currency IDRs to 'F1+' from 'F1'.

KEY RATING DRIVERS

Fitch has revised the companies' ratings following the same rating action on the Taiwanese sovereign (A+/Positive) on 22 July 2016, Fitch Applies Criteria Changes to Global Sovereign Ratings.

CPC and Taipower are assessed on a top-down basis and their ratings are equalised with the Taiwanese sovereign's ratings as per Fitch's Parent and Subsidiary Linkage methodology due to their strong strategic and operational linkages with the state.

KEY ASSUMPTIONS

Fitch's key assumption within its rating case for the issuer is that the linkages between the companies and the Taiwan sovereign remain intact.

RATING SENSITIVITIES

CPC

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

- positive rating action on the Taiwan sovereign, provided the linkage between CPC and the sovereign remain intact.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- negative rating action on the Taiwan sovereign

- significant weakening of linkages between CPC and the sovereign, such as privatisation of the entity.

Taipower

Positive: Developments that may, individually or collectively, lead to positive rating action include:

- positive rating action on the Taiwan sovereign, provided the linkages between Taipower and the sovereign remain intact

National Long-Term Rating - No positive rating action is possible as the company is already at the highest level on the National Rating scale.

Negative: Developments that may, individually or collectively, lead to negative rating action include:

- negative rating action on the Taiwan sovereign

- significant weakening of linkages between Taipower and the sovereign, such as privatisation.

For the sovereign rating of Taiwan, the following sensitivities were outlined by Fitch in its

Rating action commentary, Fitch Affirms Taiwan at 'A+'; Outlook Revised to Positive, dated 12 October 2015:

The main factors that could lead to a positive rating action, individually or collectively are:

- continued implementation of low budget deficits consistent with a downward trend in the gross general government debt to GDP ratio over the medium term

- evidence that Taiwan's trend growth performance is robust to structural adjustments in China and recent volatility in global trade volumes.

Future developments that may, individually or collectively, result in a revision of the Outlook to Stable include:

- adverse macroeconomic or financial shocks that challenge medium-term economic growth prospects, and negatively affect public finances and the financial sector

- a swift deterioration in the banking sector's asset quality, in light of the macro-prudential risks stemming from high private-sector leverage and rising China exposure.