TEXT-Fitch rates Saudi Electricity Co Sukuk 'AA-(exp)'
March 20 - Fitch Ratings has assigned Saudi Electricity Company's (SEC) upcoming international debut Sukuk issue an expected 'AA-(EXP)' rating. The rating is in line with SEC's 'AA-' Long-term Issuer Default Rating (IDR) and senior unsecured rating and SEC's 2010, 2009 and 2007 domestic Sukuks' ratings. The final rating is contingent upon the receipt of final documentation conforming materially to information already received and details regarding the Sukuk amount. The transaction involves the transfer by SEC of a portfolio of assets to Saudi Electricity Global SUKUK Company, a wholly-owned subsidiary of SEC. In its capacity as the lessor, this company will lease the assets to SEC. As the lessee, SEC will pay rental payments in respect of the assets which are intended to be sufficient to fund the periodic distribution amounts due under the certificates. On the scheduled dissolution date the trustee may exercise its rights under the purchase undertaking and require SEC to purchase all of its rights, title, interests, benefits and other entitlements in and to the assets. The Sukuk will be issued on an unsecured and unsubordinated basis. Among other aspects, the Sukuk benefits from a negative pledge and a cross default clause. Proceeds of the issuance will be used for general corporate purposes. The certificates are expressed to be governed by English law. SEC is the incumbent electric utility in the Kingdom of Saudi Arabia (KSA; 'AA-'/Stable/'F1+'). Its ratings are aligned with the sovereign in accordance with Fitch's parent and subsidiary methodology and state financial support has historically been very strong. SEC's monopolistic, low-risk, and regulated electricity transmission and distribution business and dominant presence in the electricity generation segment within the KSA also support the credit profile. However, rating concerns include execution risk related to SEC's large capex programme, low capacity utilisation rates in the electricity generation segment of the business, high electricity transmission losses, limited visibility in the current cost structure, and lack of clarity around the process to settle future fuel costs with Saudi Aramco. The Stable Outlook on the Long-term IDR mirrors that on the KSA. SEC's liquidity is strong. At the end of 2011, it had approximately SAR25.9bn in total liquidity, including SAR7.3bn in cash, with most of the remainder comprising headroom under existing government and commercial facilities. This compares well with around SAR8.1bn in debt maturities in 2012, including SAR5bn in Sukuk bonds. Contact: Primary Analyst Roshan Bains Director +44 20 3530 1194 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Erwin Van Lumich Managing Director +34 93 323 8403 Committee Chairperson Raymond Hill Senior Director +44 20 3530 1079 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: email@example.com. Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria: 'Corporate Rating Methodology', dated 12 August 2011, and 'Rating Sukuk', dated 16 August 2011 are available at www.fitchratings.com. Applicable Criteria and Related Research: Corporate Rating Methodology
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