RIYADH – Fitch Ratings has affirmed Saudi Electricity Company's (SEC) Long-term Issuer Default Rating (IDR) and senior unsecured rating at ‘AA-'. The Outlook on the Long-term IDR is Stable. Fitch has also affirmed SEC ‘s Sukuk issues at ‘AA-' and assigned the new $1 billion 3.473 percent due 2023 and $1 billion 5.06 percent due 2043 international Sukuk issues a final rating of ‘AA-'. SEC ‘s affirmation at the ‘AA-' rating level with a Stable Outlook reflects Fitch's consideration of SEC against the broader global electric utility peer group, where it is currently amongst the highest rated entities, the residual risks and opportunities inherent in the sector; and the scale of the current investment program, including its expected weight upon SEC ‘s balance sheet over the next few years. The detachment from the Saudi sovereign rating (‘AA-'/Positive), not continuing to align the ratings as the sovereign is upgraded, reflects the continuing expectation of direct and indirect support from the Saudi government and its institutions, as well as the low expectation of electricity market liberalization within a meaningful time horizon, Fitch said. At the ‘AA-' rating level SEC ‘s ratings are aligned with the KSA, based on strong legal, operational, and strategic links, in accordance with Fitch's Parent and Subsidiary Rating Linkage methodology. If the sovereign rating was upgraded to ‘AA', SEC ‘s rating would likely remain ‘AA-', notched down from the sovereign rating. KSA directly owns 74 percent of SEC (and indirectly owns another 7 percent through Saudi Aramco. SEC has been instrumental in executing KSA's policies on electrification.
Through its council of ministers, the government is responsible for approving the electricity tariffs that SEC can charge its customers. Currently, the electricity tariffs for residential customers are deeply subsidized. — SG
