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RIYADH: Moody’s has upgraded the ratings of six major government-related institutions in Saudi Arabia, including the Public Investment Fund, to Aa3 from A1.
The move reflects strong sovereign backing and stable credit linkages to the government.
The agency also assigned the Aa3 rating to Saudi Aramco, Saudi Basic Industries Corp., and Saudi Electricity Co., as well as Saudi Power Procurement Co., and Saudi Telecom Co.
Moody’s assigns an Aa3 rating to companies with high quality, low credit risk, and strong ability to repay short-term debts, providing an assessment of the creditworthiness of borrowers, including governments, corporations, and other entities that issue debt.
“The rating action is a direct consequence of the sovereign rating action and reflects the credit linkages between the Government of Saudi Arabia and each of the six entities,” said Moody’s.
It added: “While several of 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.”
The strong ratings received by these firms is an indication of Saudi Arabia’s robust economic stability, following Moody’s upgrade of the Kingdom’s credit rating to Aa3 with a stable outlook in November.
In May, Fitch Ratings upgraded Saudi Arabia’s credit rating to A+ with a stable outlook.
PIF
File/AFP
The upgrade of PIF’s long-term issuer rating to Aa3 from A1 aligns with the Saudi government’s rating action and reflects the strong credit linkage between the sovereign wealth fund and the Kingdom, according to Moody’s.
The report also noted that PIF is expected to receive strong and extraordinary support from the Saudi government whenever needed.
“PIF is closely interlinked with the Kingdom because it is one of the main vehicles of the Kingdom to execute its Vision 2030; PIF continues to receive contributions from the Kingdom via asset transfers; and given the fund’s investment focus and concentration in domestic markets,” added the US-based agency.
According to the analysis, PIF’s rating is in line with that of the Saudi government, meaning the fund’s rating could be downgraded if the sovereign rating declines.
In July, PIF’s consolidated financial statement revealed that the fund generated SR331 billion ($88.3 billion) in revenue in 2023 from its diverse investment portfolio, reflecting over 100 percent growth compared to 2022.
Saudi Aramco
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The report indicated that Aramco’s rating upgrade reflects the high likelihood of extraordinary support from the government if needed.
The US-based agency also noted that the energy company has access to nearly all of Saudi Arabia’s vast hydrocarbon resources and significant petrochemical operations.
Earlier in November, Aramco reported a net profit of SR103.37 billion for the third quarter of 2024, surpassing analyst expectations, which had projected a median net income of SR101.06 billion.
SABIC
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According to Moody’s, SABIC’s rating upgrade is due to its strong reliance on the government and the high probability of receiving government support in the event of financial distress.
The report also highlighted the company’s strong global position in the petrochemical and fertilizer markets as another key factor behind the credit rating upgrade.
In the third quarter of this year, SABIC reported a net profit of SR1 billion, a turnaround from the net loss of SR2.87 billion in the same period last year.
SEC
Describing SEC as the “dominant vertically integrated electricity utility in Saudi Arabia,” Moody’s stated that the company served over 11.23 million customers as of Sept. 30, 2024.
“SEC’s rating reflects the significant credit linkages between SEC and its ultimate shareholder, the Government of Saudi Arabia. All of SEC’s assets are in Saudi Arabia and the company benefits from supportive government policies,” said the US-based agency.
In the third quarter of this year, SEC reported a net profit of SR4.7 billion, a 19.8 percent increase compared to the same period last year.
SPPC
Moody’s stated that SPPC has a clear public policy mandate that aligns its interests and objectives with those of the government.
As the sole licensed principal buyer of electricity in Saudi Arabia, the company has significant credit linkages with the government, which played a crucial role in the latest rating action.
Moody’s also noted that the rating reflects SPPC’s low business risk profile, its monopoly position in the Kingdom, and its ability to maintain a strong liquidity profile despite high working capital seasonality.
stc
According to the report, the rating upgrade of stc – the leading integrated telecommunications and ICT operator in Saudi Arabia – reflects the company’s strategic importance to the government, as well as the state’s high level of control through PIF.
Moody’s added that stc generates over 90 percent of its revenue in the Kingdom and plays a key role in supporting the government’s technological and digital ambitions, a crucial goal outlined in Vision 2030.
Affirming stc’s dominance in the Saudi market, the company reported a net profit of SR11.23 billion in the first nine months of this year, a 2 percent increase compared to the same period in 2023.