Saudi Electricity sukuk gets stable outlook
London, March 24, 2012
Moody's Investors Service has assigned an A1 rating with a stable outlook to the proposed issuance of trust certificates (sukuk) by Saudi Electricity Global Sukuk Company, a special purpose vehicle of Saudi Electricity Company (SEC).
Moody's considers the sukuk, which follows the structure of an 'Ijarah' transaction, to be a senior unsecured obligation.
The rating agency's assignment of an A1 rating to the sukuk is in line with the long-term issuer rating of SEC and reflects:
(i) the ultimate obligation of SEC to ensure that the periodic distribution amount is always maintained; and
(ii) the existence of a purchase undertaking, which implies that certificate, or sukuk, holders ultimately rely on the creditworthiness of SEC for repayment when the trust is dissolved.
Certificate holders have no security, lien or pledge over any of the leased assets. Under the structure, SEC acts as servicing agent and lessee, said the Moody's in a statement.
As per the terms of the sukuk, SEC will issue the securities through SEGSC. Upon issuance, the sukuk holders will pay the proceeds of
the transaction to SEGSC, which will in turn pay an equivalent amount to SEC under the purchase agreement for the leased assets.
Sukuk holders will periodically earn an amount that reflects the rent due in respect of the Ijarah agreement.
Payment obligations under the various documents -- especially under the Ijarah agreement and purchase undertaking -- will be direct,
unconditional, unsecured and general obligations of SEC and rank at least pari passu with all other unsecured, unsubordinated and general
obligations of the company.
At maturity or upon a dissolution event, SEC is required, by means of the purchase undertaking, to fully repay - including any unpaid and accrued periodic distribution amount -- the aggregate face value of the certificates/sukuk.
According to Moody's, the SEC's A1 rating is mainly supported by its low business risk profile. The company enjoys a dominant domestic market position as the integrated and exclusive electricity provider in Saudi Arabia, either directly or through independent power purchasers in which it owns a stake.
The regulatory environment remains highly supportive, although not as
developed or contractually beneficial as other Gulf Cooperation Council jurisdictions, given the absence of total cost recovery principle, it added.-TradeArabia News Service