Moody's assigns A3 rating to 4 Omani utilities stable outlooks

(MENAFN- Muscat Daily) Moody's Investors Service has assigned A3 long-term issuer ratings to Dhofar Power Co (DPC) Majan Electricity Co (MJEC) Mazoon Electricity Co (MZEC) and Muscat Electricity Distribution Co (MEDC).

The outlook on all ratings is stable. This is the first time Moody's has assigned ratings to these utilities.

'The long-term issuer ratings reflect the standalone creditworthiness as expressed by the baseline credit assessment (BCA) combined with a very high dependence on and high level of support from the Oman government' the ratings agency said in a press release.

The respective BCAs are as follows: baa3 (DPC) baa2 (MJEC) baa2 (MZEC) baa2 (MEDC).

Moody's views all four distribution companies (discoms) as government-related issuers that receive a high level of support from the Oman government. Although the Law for the Regulation and Privatisation of the Electricity and Related Water Sector in Moody's view supports even stronger support at very high the shading of support takes into account the individual firms' potential future privatisations.

Under the sector law Oman's Ministry of Finance has the ultimate obligation to provide financial support to any licensed company in the electricity and related water sector that is wholly owned by the government and would provide immediate liquidity on demand if required.

According to Moody's the BCAs of the discoms reflect: (1) The regulator's record of transparency and independence; (2) the cost-recovery mechanisms of the regulatory framework; as well as (3) the low business risk profile of the electricity distribution and supply activities and the companies' regional monopoly positions in Oman. 'The BCAs remain constrained by the (1) high capital investment programmes over at least the 2015-2019 cycle; (2) associated financing requirements and frequent access to third-party debt funding; and (3) shareholder distributions albeit at fairly moderate levels it added.