Moody's raises SECs ratings to A1 on increased government support

The outlook on all ratings is negative, reflecting the negative outlook on Saudi Arabia's sovereign rating and the significant credit linkages between SEC and the government, according to a press release on Wednesday.

The upgrade to A1 highlights Moody's revised assumption of government support to "Very High" from "High". Moreover, the action is underpinned by a proposed new regulatory framework set to be implemented on 1 January 2021.

“The new regulatory framework will lead to more stable and predictable cash flows for most of the company's operations. The framework will allow SEC to recover its operational costs and earn a fair rate of return of 6.0% on its investments… However, Moody's recognises the need for an operating track record under the new regulatory framework, especially when it comes to the timeliness of payments,” the rating agency said.

SEC's baseline credit assessment (BCA) remained unchanged at baa1.

Liquidity

Moody's considers SEC's liquidity profile as adequate and expects a rise in the company's capital expenditures under the new regulatory framework which will require external funding.