Moody's says Australian carbon price not to weigh on corporate ratings

08:20, July 14, 2011      

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The proposed carbon price, announced by the Australian government, will not weigh heavily on the ratings of Australian corporate issuers, said Moody's Investors Service, a leading global credit rating, research and risk analysis firm.

"At this point, the proposed price, which will most affect carbon-intensive sectors, is manageable within the ratings of corporate issuers," Moody's Senior Vice President Terry Fanous said in a statement on Wednesday.

He said the specific financial impact of the tax on each rated issuer would depend on various factors, including the amount of carbon emitted, the compensation offered under the proposed scheme and the ability to pass costs on to customers without materially eroding demand.

Fanous was speaking on the release of a Moody's report analyzing the effects of the proposed carbon price, announced by Prime Minister Julia Gillard on July 10.

The report said the sectors that would be most affected were airlines, steel, coal-based mining, petroleum, chemicals, metals manufacturing, and building products.

Among them, the domestic aviation sector was likely to be one of the worst hit, given the possibility of a subsequent increase in domestic jet fuel costs, the reported noted.

It said Qantas Airways could face further challenges as it had limited headroom within its rating.

Other key rated issuers in the affected sectors include Alcoa of Australia, BHP Billiton, Rio Tinto, Boral, Woodside Petroleum Ltd. and Incitec Pivot.

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