Riyadh: Tassnief has maintained long-term national scale entity rating of “(A-)’’ (Single A Minus) and a short-term entity rating of “T-3” assigned to Alkhorayef for Water and Power Technologies Company (“AWPT” or the “Company”). The assigned ratings reflect robust credit profile. Tassnief considers the rated issuer or issuance to hold high creditworthiness and thus low credit risk. The risk profile may vary with changes in economic / sector conditions.

Rating Rationale: The ratings assigned to AWPT are underpinned by strong underlying business fundamentals which supports demand for the Company’s services and presence across all four comprehensive strategic delivery models: Engineering, Procurement, and Construction (EPC), Operations and Maintenance (O&M), Privatization Development through Public-Private Partnerships (PPP), and Asset Management & Concession. The ratings also incorporate leading market position in critical segments of the water infrastructure industry, supported by strong revenue visibility and a robust order backlog, indicative of sustained revenue growth momentum. The ratings also reflect AWPT’s strong governance framework, experienced management team, robust internal controls, and a healthy & improving financial risk profile. The ratings also consider the solid financial profile of key shareholder Alkhorayef Group, which maintains diversified interests across various sectors within the Kingdom.

The Company benefits from strong underlying business fundamentals driven by policy focus of the government on expansion of water infrastructure in the Kingdom. A significant risk to revenue growth arises from shifts in government priorities and reduction in government spending although Tassnief does not foresee this risk emanating in the near term. The Company has implemented a defined strategy to mitigate this impact including geographical diversification and expansion into complementary businesses.

The overall financial profile remains robust, characterized by growing profitability, an expanding equity base, manageable leverage indicators, and sound financial flexibility; while leverage indicators are anticipated to rise over the rating horizon, they are expected to remain within manageable levels. Despite an increase in the contribution of project services in revenue mix, overall working capital cycle remains manageable due to the focused efforts by the management. However, the Company has historically experienced weak conversion of Funds from Operations (FFO) into Cash from Operations (CFO), primarily due to an increase in receivables and contract assets, although there has been some improvement noted during 1H2024.

Rating Triggers: The rating would continue to depend on further strengthening the market position and enhancing quantum of cash flow generated. Moreover, maintaining a conservative financial profile in terms of leverage and coverage ratios is considered crucial.

About the Company: AWPT is Listed Saudi Joint Stock Company registered in Riyadh, KSA under CR#1010085982. It is engaged in contracting for implementation and O&M of water and wastewater infrastructure, along with provision of associated integrated solutions including stormwater network, city water management, and support and asset services. As per GOSI, there are 7,500 employees with Saudization ratio of 18%. Financial statements for 2023 and 1H2024 are audited by KPMG Professional Services with unqualified opinion.