Moody’s upgrades Saudi Electricity’s credit rating to A1

Moody's Investors Service upgraded the ratings of Saudi Electricity Co. (SEC) to A1 from A2 on account of increased government support. The outlook was maintained at negative, the agency said in a recent report.

The new regulatory framework will lead to more stable cash flows for most of the company's operations. It will also allow SEC to recover its operational costs and earn a fair rate of return of 6% on its investments, the report added.

This would reduce the company’s need to seek financial support from the government.

Moody's considers SEC's liquidity profile as adequate and anticipates acceleration in the company's capital expenditures under the new regulatory framework, which will require external funding.

According to the data available with Argaam, SEC recently signed an agreement with the government to reclassify its net government liabilities worth SAR 167.92 billion into a subordinated perpetual financial equity-like instrument with a redemption option and a profit rate of 4.5% per annum.