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Moody's assigns A2 rating to SEC’s green Sukuk issue; outlook negative

Moody's assigns A2 rating to SEC’s green Sukuk issue; outlook negative
SEC will use the Sukuk issue to finance certain eligible green projects
0.60% 16.74 0.10

Riyadh – Mubasher: Moody's Investors Service has assigned an A2 rating to the proposed senior unsecured green Sukuk certificates to be issued by Saudi Electricity Global SUKUK Company 5, a special purpose vehicle (SPV) established in the Cayman Islands by Saudi Electricity Company (SEC, A2 negative).

The rating agency assigned a negative outlook for the said certificates, according to a statement on Thursday. 

The A2 rating and negative outlook are at the same level as the long-term issuer rating of SEC, Moody's said, noting that any change in SEC's ratings will automatically reflect on the rating of the issuer and of the issued certificates.

SEC has begun issuing US dollar-denominated fixed-rate RegS senior unsecured international green Sukuk to finance certain eligible green capital projects.  

"We view SEC as a government-related issuer (GRI) that benefits from credit linkages with the government of Saudi Arabia. The long-term issuer rating of A2 reflects the creditworthiness of SEC as expressed by a baseline credit assessment (BCA) of baa1, combined with a 'very high' level of dependence and 'high' level of support from the government," Moody's said. 

It continued, "The negative outlook is in line with the Government of Saudi Arabia and reflects the significant credit linkages between the company and the sovereign."

Factors that could lead to an upgrade or downgrade of the rating

A rating upgrade is currently unlikely given the negative outlook. However, the rating could be downgraded as a result of a downgrade of Saudi Arabia's government bond rating, a change in Moody's government support and dependence assumptions, or a weakening of SEC's credit metrics.