GCC utilities ratings 'relatively high'
London, March 21, 2012
The ratings of utilities in the Gulf region remain relatively high, reflecting both their defensive characteristics and their ownership by and support from their respective governments, according to a report by Moody's.
The existing GCC regulatory frameworks, which have been engineered by the respective government-owners, support the utilities' credit quality but differ significantly, Moody's said in its report, "GCC Rated Utilities: Common Challenges, Different Frameworks."
These ratings take account of the strong government support, but also reflect differing regulatory and policy frameworks that inform the different development stages in terms of generation capacity and network expansion as well as the different strengths in the utilities' respective financial profiles, the ratings agency added.
According to Moody's, there are key distinctions in the different models applied by respective governments.
One model is the managed unbundling of power and water generation activities from transmission & distribution among Qatar Electricity and Water Company (QEWC, A1/stable) and Abu Dhabi National Energy Company (Taqa, A3/stable) for domestic regulated activities that has largely eliminated market risk for these utilities.
Another model is the fully integrated one implemented at Saudi Electricity Company (SEC, A1 stable) and Dubai Electricity and Water Authority (Dewa, Ba1 stable), the report stated.
A key credit implication is the degree of commercial exposure (i.e. reliance on actual consumption and pricing to the final customer) and cost recovery implications, although this is largely compensated in various ways through material and ongoing state support, it added.-TradeArabia News Service