Fitch Ratings has reaffirmed the financial strength of Taiwan Power Company (Taipower), assigning a ‘AAA(twn)’ rating to the state-owned utility’s proposed TWD16.1bn ($520mn) bond issue, underscoring the company’s vital public role and the government’s readiness to support it as Taiwan pursues an ambitious energy transition.

The proceeds of the issue will go towards Taipower’s ongoing capital expenditure programme, which Fitch expects to surge to between TWD260bn ($8.4bn) and TWD333bn annually through 2028. The increase reflects heavy investment in new gas-fired and offshore wind plants, alongside large-scale upgrades to the grid. These projects are central to Taiwan’s plan to reach net-zero carbon emissions by 2050 and to stabilise the network as renewable generation expands.

Taipower’s national long-term rating sits at the top of Fitch’s domestic scale, reflecting an extremely low default risk. Its international rating remains aligned with Taiwan’s sovereign AA/Stable rating under the agency’s Government-Related Entities criteria.

The Ministry of Economic Affairs owns 96.6% of Taipower and maintains close oversight of its operations, tariffs, and investment decisions. Electricity prices are regulated through the Electricity Tariff Examination Council, while the company is required to report regularly to the government on its finances and operations.

Fitch described precedents of state support as “strong”, citing equity injections of TWD250bn over 2023–24 and subsidies of TWD50bn in 2023, which helped offset heavy losses caused by soaring fuel costs. The agency also expects annual compensation of between TWD10.4bn and TWD14.4bn for policy-related expenses.

The government has “very strong” incentives to sustain the utility, Fitch said, given Taipower’s near-monopoly position - accounting for 68% of generation and 99% of distribution in 2024 - and its importance as a benchmark borrower whose bonds trade at yields close to government debt.

Financial performance has improved after steep losses in 2022–23, when surging global fuel costs could not be fully passed on to consumers. Fitch projects Taipower’s EBITDA margin will recover to between 11.2 and 14.2% in 2025–28, up from 8.9% in 2024 and a negative 22.5% in 2022, aided by tariff increases and moderating fuel prices. Interest coverage is expected to strengthen to 4.9–6.4 times over the next three years.

Retail electricity tariffs are likely to remain stable following cumulative hikes averaging about 20% in 2024 and modest adjustments in 2025. Fitch further expects limited downward pressure, as current tariffs remain below the levels permitted under the Electricity Act and Taipower continues to shoulder state energy mandates.

The utility’s standalone credit profile remains constrained by high leverage - EBITDA net debt above 15 times - due to heavy capital expenditure. However, Fitch said the combination of state backing, policy relevance and strong funding access supports the company’s AA/AAA(twn)/Stable rating outlook.

Taipower’s position mirrors that of CPC Corporation, Taiwan’s state oil refiner, whose ratings are also equalised with the sovereign. Fitch said both entities “operate as proxies for government borrowing” and remain essential pillars of Taiwan’s energy system.