Moody’s downgrades Oman power & water procurement to A3 from A1

Moody’s Investors Service, (“Moody’s”) today downgraded the long-term domestic and foreign currency issuer ratings of Oman Power & Water Procur. Co. (S.A.O.C.) (OPWP) to A3 from A1 and placed the ratings on review for further downgrade. Moody’s also placed six other Omani Government Related Issuers on review for downgrade. A complete set of companies (“the issuers”) and rating actions is listed below.

List of affected ratings:

On Review for Downgrade:

..Issuer: Dhofar Power Company SAOC

…. Issuer Rating (Local Currency), Placed on Review for Downgrade, currently A3

..Issuer: Majan Electricity Company SAOC

…. Issuer Rating (Local Currency), Placed on Review for Downgrade, currently A3

..Issuer: Muscat Electricity Distribution Company SAOC

…. Issuer Rating (Local Currency), Placed on Review for Downgrade, currently A3

..Issuer: Mazoon Electricity Company SAOC

…. Issuer Rating (Local Currency), Placed on Review for Downgrade, currently A3

..Issuer: Lamar Funding Limited

….BACKED Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently A3

..Issuer: Oman Electricity Transmission Company SAOC

…. Issuer Rating (Foreign Currency), Placed on Review for Downgrade, currently A3

..Issuer: Oman Telecommunications Company S.A.O.G.

…. Issuer Rating (Local Currency), Placed on Review for Downgrade, currently A3

Downgrades:

..Issuer: Oman Power & Water Procur. Co. (S.A.O.C.)

…. Issuer Rating (Foreign Currency), Downgraded to A3 from A1; Placed Under Review for further Downgrade

…. Issuer Rating (Local Currency), Downgraded to A3 from A1; Placed Under Review for further Downgrade

Outlook Actions:

..Issuer: Dhofar Power Company SAOC

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Majan Electricity Company SAOC

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Muscat Electricity Distribution Company SAOC

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Oman Power & Water Procur. Co. (S.A.O.C.)

….Outlook, Changed To Rating Under Review From Negative

..Issuer: Mazoon Electricity Company SAOC

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Lamar Funding Limited

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Oman Electricity Transmission Company SAOC

….Outlook, Changed To Rating Under Review From Stable

..Issuer: Oman Telecommunications Company S.A.O.G.

….Outlook, Changed To Rating Under Review From Stable

Today’s actions follow the downgrade on 26 February 2016 of the Government of Oman’s bond rating to A3 from A1 with review for further downgrade. The rating action on the sovereign rating is driven by (1) the high negative impact from low oil prices on the country’s finances; (2) its economic performance; and (3) its current balance-of-payment positions.

RATINGS RATIONALE

Rationale for downgrading the rating of OPWP

The downgrade of OPWP’s ratings to A3 from A1, follows Moody’s rating action on the government of Oman given the close links between the two entities. Given the legal and regulatory framework, in combination with the government’s exclusive ownership and low business risk profile, OPWP’s baseline credit assessment (BCA) of a3 remains on par with the credit risk assessment of the government of Oman. OPWP’s intrinsic strengths include the (1) role the company plays in the country’s power and water sector; (2) provisioning of timely financial support from the government as stipulated by law; and (3) exclusive government ownership of OPWP.

Rationale for placing OPWP and the other six issuers ratings on review for downgrade

The issuers’ credit profiles have a strong degree of credit linkage to the Omani economy and government given assumed financial support and dependence as GRIs.

The review for downgrade on the issuers’ A3 ratings will assess the credit implications of (1) the conclusion of the review for downgrade on Oman’s government bond rating; (2) Omani government support and dependence assumptions; and (3) the impact of a weakening economic environment on business profiles given continued low oil prices which could pressure Baseline Credit Assessments (BCA).

The rating agency will also factor planned actions that the government could take to finance its budget deficit and the consequential impact for the issuers.

The principal methodology used in rating Majan Electricity Company SAOC, Muscat Electricity Distribution Company SAOC, Mazoon Electricity Company SAOC, Oman Power & Water Procur. Co. (S.A.O.C.) and Dhofar Power Company SAOC was Regulated Electric and Gas Utilities published in December 2013. Other methodologies used include the Government-Related Issuers methodology published in October 2014.

The principal methodology used in rating Oman Electricity Transmission Company SAOC and Lamar Funding Limited was Regulated Electric and Gas Networks published in November 2014. Other methodologies used include the Government-Related Issuers methodology published in October 2014.

The principal methodology used in rating Oman Telecommunications Company S.A.O.G. was Global Telecommunications Industry published in December 2010. Other methodologies used include the Government-Related Issuers methodology published in October 2014.

Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

The Lead Analyst on Oman Telecommunications Company S.A.O.G. is Douglas Rowlings, Analyst, Corporate Finance Group, +971.4.2379543.

The local market analyst for Mazoon Electricity Company SAOC, Oman Electricity Transmission Company SAOC and Lamar Funding Limited ratings of is Julien Haddad, Analyst, Corporate Finance Group, +971.4.2379539, Journalists 44 20 7772 5456, Subscribers 44 20 7772 5454.


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