ECL Assessment for Utilities Company
Valtech’s valuation team has recently completed an expected credit loss (“ECL”) assessment for a Hong Kong listed utilities company.
In this case, our client’s counterparties are mostly PRC governmental entities. Although governmental entities’ credit risks are generally considered low, the differences among national government, provincial government entities and state-owned enterprises (“SOEs”) can be significant. Unfortunately, the credit ratings of provincial governments and SOEs are normally not evaluated by global credit agencies, leading to additional complexity in credit assessment. Thus, our value-added service is to provide a systematic way to assess the credit risk of provincial government and SOEs.
In our assessment, we have made reference to various market data including the credit spread of provincial government bonds, the provincial government’s GDP and their interest payment during the year, etc. Further integrating these considerations into the default credit assessment on overdue days, we can then provide a clear matrix for our client to assess the ECL rate for each counterparty based on both market data and actual overdue status. This not only helped our client to prepare their financial statements within the regulatory framework, but also strengthened their understanding of any potential credit risk they may face based on the current market trend.
About Valtech Valuation
Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The firm is renowned for its expertise in advanced valuation techniques, customized valuation models, data-driven insights, and adherence to compliance and reporting standards. The firm has a solid track record in valuation advisory for listed companies, private equity, fund managers, and financial institutions. Valtech’s qualified team comprises members with PhDs, CPA (HKICPA), CFA, Chartered Valuation Surveyors of the Royal Institution of Chartered Surveyors, and valuers accredited with Business Valuation (ABV) by AICPA and CVA qualifications in Singapore. Valtech continues to expand into more markets by leveraging its valuation platform and recruiting local experts.