Moody’s upgrades ratings of 5 Omani government-related entities

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Muscat – Moody’s Investors Service on Thursday upgraded the corporate family ratings (CFR) of five government-related issuers (GRIs) domiciled in Oman to Ba1 from Ba2. The outlooks of all five government-related entities have changed to stable from positive.

The rating action is a direct consequence of Moody’s recent rating action on the Government of Oman where the government bond rating was upgraded to Ba1 from Ba2, the agency said in a statement.

Moody’s upgraded the ratings of 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).

According to Moody’s, the ratings of these five entities have been upgraded to Ba1 because of their close linkage to the government and high exposure to the domestic operating environment. The outlooks have changed to stable from positive.

‘The upgrade of the ratings reflects the close interlinkage of DISC, NEDC, NESC, OETC and OPWP with the sovereign rating because of their significant exposure to the Omani government in the form of subsidies (OETC, NEDC and OPWP being indirectly exposed),’ Moody’s noted.

The rating agency said the liquidity of DISC, NEDC, NESC and OPWP remains weak because of their continued reliance on short-term debt funding. It added that NEDC, DISC and OETC will also continue to face high capital spending in the next 12-18 months with associated funding requirements and increases in leverage.

Moody’s said it will also be monitoring the impact from the transfer of the water and wastewater assets (water assets) in the Dhofar region, on DISC’s business profile.

According to Moody’s, the ratings of DISC, NEDC, NESC, OETC and OPWP remain 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.

The stable outlook for DISC, OPWP, NEDC, NESC and OETC are in line with the stable outlook on the government rating. Moody’s classifies DISC, NEDC, NESC, OETC and OPWP as GRIs that benefit from strong credit interlinkages with the Government of Oman.