Moody’s affirms ratings of 5 government-related companies in Oman

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Muscat – Global credit rating agency Moody’s Ratings affirmed the corporate family ratings (CFR) of five Omani government-related issuers (GRIs) on Friday. The outlook for four GRIs was maintained as stable, while the outlook for one government-related entity was upgraded from stable to positive.

Moody’s affirmed the ratings of the following five government-related entities: Dhofar Integrated Services Company (DISC), Oman Electricity Transmission Company (OETC), Oman Power and Water Procurement Company (OPWP), Nama Electricity Distribution Company (NEDC), and Nama Electricity Supply Company (NESC).

This rating action by Moody’s is a direct consequence of the recent rating action on the Government of Oman, where its long-term issuer and long-term senior unsecured ratings were affirmed at Ba1, with the outlook upgraded to positive from stable.

‘The affirmation of the ratings reflects the close interlinkage of DISC, NEDC, NESC, OETC, and OPWP with the sovereign as providers of essential electricity services and their significant exposure to the Omani government in the form of subsidies (OETC, NEDC, and OPWP being indirectly exposed),’ Moody’s said in a statement.

OPWP’s outlook was upgraded to positive from stable, while the outlooks for DISC, OETC, NEDC, and NESC were maintained as stable, according to Moody’s.

‘The positive outlook for OPWP is aligned with the positive outlook on the government rating. OPWP is the monopoly buyer of electricity and water from licensed production facilities in Oman and also performs government agency-like functions in certain activities, such as future electricity planning,’ the rating agency noted.

‘The stable outlook on DISC, NEDC, NESC, and OETC reflects our view that, absent sustained improvements in their respective liquidity profiles, we do not foresee further upward pressure on their ratings. The liquidity of DISC, NEDC, and NESC remains weak due to their continued reliance on short-term debt funding,’ Moody’s added.

According to Moody’s, the ratings of DISC, NEDC, NESC, OETC, and OPWP are supported by (1) the stable and transparent regulatory frameworks for the electricity and water sectors and the independence of the regulator; (2) the cost recovery mechanisms of the regulatory frameworks; (3) the low business risk profile of their activities; and (4) their respective monopoly positions in Oman.

Moody’s pointed out that OPWP’s rating could be upgraded if Oman’s sovereign rating were upgraded, provided there is no material deterioration in the company’s operating and financial performance or its liquidity profile.

The rating agency does not currently anticipate any further upward pressure on DISC, NEDC, NESC, and OETC ratings due to these companies’ weak liquidity profiles. ‘However, positive rating pressure could emerge over time if these companies improve their liquidity on a sustained basis and demonstrate a commitment to maintaining good liquidity throughout their respective capital investment cycles. This would also require an upgrade of Oman’s sovereign rating and no material deterioration in the companies’ operating and financial performance,’ Moody’s said.