Fitch Ratings has upgraded Oman Electricity Transmission Company SAOC (OETC) Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB+' from 'BB'. The Outlook is Stable.
The rating action follows the upgrade of Oman's Long-Term Foreign-Currency IDR to 'BB' from 'BB-'
“We view OETC as the 'stronger subsidiary', based on its Standalone Credit Profile (SCP) of 'bb+', which is higher than Oman's sovereign rating (BB/Stable). We assess the legal ring-fencing around OETC as 'open'; and access and control as 'porous', leading to a consolidated plus one approach (ie sovereign rating plus one),” said Fitch.
The ratings agency also applied its Government-Related Entities (GRE) Rating Criteria to OETC's rating, as the Omani government continues to have sufficient control over OETC through involvement in and influence over its strategic, operational and financial activities, while it controls 51 per cent of OETC through Nama Holding.
“Under our GRE Rating Criteria we assess the track record of support, socio-political and financial implications of a default as 'Moderate' and ownership and control as 'Strong',” it noted.
OETC's 'bb+' SCP, the agency said, reflects the company's stable profitability, with a significant share of EBITDA from regulated electricity transmission over the fifth price-control (PC5) period.
“We expect the same under the new price control (PC6), which starts in 2023. Fitch estimates average funds from operations (FFO) net leverage between 2022 and 2025 at about 6.3x, implying low headroom under its negative rating sensitivity of 6.5x for the SCP. OETC's business profile as the natural monopoly national transmission system operator within a supportive regulatory framework underpins the SCP,” it added.
OETC is a monopoly provider of electricity transmission services to the main interconnected system in the north of Oman and to the transmission network in Dhofar Governorate.
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