Arab News, Saturday, Mar 25, 2023 | Ramadan 3, 1444
Moody’s boosts ratings for six key Saudi companies, including PIF and Aramco
Saudi Arabia: Saudi Arabia’s Public
Investment Fund and energy giant Aramco are among six firms in the Kingdom to
have their ratings boosted from stable to positive by Moody's Investors Service.
The credit rating agency said the upgrade in
outlook is linked to the strength of Saudi Arabia’s economy, which was also
changed to positive from stable earlier this month.
Saudi Basic Industries Corporation, also known as
SABIC, Saudi Telecom Co., known as stc, and the Saudi Power Procurement Co. were
among the other companies to see their grading increase.
The Saudi Electricity Co. also received a boost.
In a report explaining its rationale for the
shift, the ratings agency said: “(These) rating actions are a direct consequence
of the sovereign rating action and reflect the credit linkages between the
Government of Saudi Arabia and each of the six entities.
“While these corporates benefit to varying degrees
from international assets and cash flows, they all have significant credit
linkages to the Saudi Arabia sovereign and are exposed to the domestic
environment including political, economic, regulatory and social factors.”
Reflecting on Aramco, the report said the
company’s A1 rating “reflects its very large operational scale, significant
downstream integration and strong financial flexibility given its low cost
structure and low leverage relative to cash flows.”
It added: “These characteristics provide
resilience through oil price cycles and also help mitigate carbon transition
risk, which is a material credit consideration for oil and gas companies.”
Moody’s said that SABIC had been able to maintain
its strong global position in the petrochemical and fertilizer market thanks to
“competitively priced domestic feedstock under long-term contracts with Saudi
Aramco.”
The report added: “These advantages help mitigate
to an extent the volatility of its predominantly commodity-based petrochemical,
fertilizer and steel activities and SABIC's asset concentration in Saudi
Arabia.”
In a section on the PIF, Moody’s said the
organization had a “high-quality investment portfolio”, a “very strong financial
profile with very low leverage and very high interest coverage”, and an
“excellent liquidity profile”.