Fitch Ratings has assigned Taiwan Power Company’s proposed TWD8.2bn ($260mn) bond a top-tier national rating, underlining the state-owned utility’s central role in the island’s energy system and the strength of expected government backing.

The senior unsecured notes have been given a National Long-Term Rating of AAA(twn), in line with Taipower’s existing domestic rating Fitch reports. Proceeds from the issuance will be used to fund the company’s expanding capital expenditure programme, as it upgrades the power grid and invests in new generation capacity to support Taiwan’s energy transition.

Fitch continues to align Taipower’s long-term issuer rating with that of the Taiwanese sovereign, reflecting what it describes as an exceptionally strong likelihood of state support. The utility is strategically critical, dominating power transmission and distribution while accounting for more than two-thirds of electricity generation. Any disruption to its operations would have immediate and far-reaching consequences for economic activity and energy security.

Government oversight is extensive. Taipower is 96.6% owned by the Ministry of Economic Affairs, which exercises close control over investment decisions, capacity expansion and tariff setting. Electricity prices are regulated, and the company is required to provide regular financial and operational reporting to the authorities. As such, this tight governance framework is a key pillar supporting the high rating.

Recent financial support has reinforced that assessment. The government injected TWD250bn of equity in 2023 and 2024 and provided subsidies during a period of heavy losses triggered by a surge in global fuel prices. Further compensation is expected for policy-related costs incurred by the utility, reflecting its role in cushioning consumers from price volatility.

Profitability has begun to recover following successive tariff increases and easing fuel costs. To this end, Fitch expects operating margins to continue improving over the next few years, although pressures remain from higher payments to independent power producers and the rising share of renewables in the generation mix. Retail electricity prices are forecast to remain broadly stable, with limited political appetite for reductions despite lower input costs.

Capital spending is set to rise sharply as Taipower presses ahead with gas-fired generation, offshore wind projects and major grid upgrades. Annual investment is expected to exceed TWD260bn over the rest of the decade, a scale that will keep leverage high but is seen as manageable given the company’s strong access to low-cost funding.