Electricity and Water Company (QEWC) on Monday got a long-term local currency issuer rating of A1 from Moody’s Investors Service. The outlook assigned to the rating is stable.
This is the first time that Moody’s has assigned ratings to QEWC. “QEWC’s A1 rating is mainly supported by the beneficial contractual framework that was put in place by Qatar that significantly reduces the exposure of QEWC and its Qatari joint ventures to common industry risks for utilities — namely, regulatory, demand and price risks,” a Moody’s press release from London said.
The company benefits from a stable operating cash flow stream, which is derived from secure, longterm power purchase agreements as well as from power and water purchase agreements with the 100 percent government-owned Qatar General Electricity and Water Corporation (not rated, known as Kahramaa) acting as sole off-taker.
The latter benefits from a government guarantee with respect to its financial obligations under contracts with QEWC for plants commissioned after 2002.
All QEWC’s plants are gas-fired and gas purchase agreements are all with Qatar Petroleum (Aa2/stable). “Capacity-derived payments are structured in all agreements to ensure that fixed operating costs, investment costs, an agreed return on equity and comprehensive debt servicing are covered on a cash basis.
The cost pass-through mechanisms that are built into the tariffs mitigate QEWC’s exposure to any volatility in prices and gives QEWC’s financial performance stability,” said Franck Nowak, a Dubai-based Analyst in Moody’s Corporate Finance Group and lead analyst for QEWC.
The assigned A1 rating incorporates significant uplift from its stand-alone profile equivalent to a Baa1 rating, reflecting potential support from QEWC’s main shareholder, the State of Qatar (Aa2/stable).
Electricity and water generated by the company and its joint ventures account for the whole of Qatar’s installed capacity and will remain critical in supporting economic activity.
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