Moody's upgrades ratings of seven government-related Omani companies

Actions follow decision to lift sultanate's government bond rating to Ba2 from Ba3, with a positive outlook

Oman, the largest non-Opec producer in the Middle East, expects a budget deficit of $3.37 billion in 2023. Silvia Razgova / The National

Moody's Investors Service has upgraded the ratings of seven government-related Omani companies and maintained their positive outlook, an action supported by their “close linkage” to the sultanate's government.

The seven entities whose corporate family ratings were elevated to Ba2 from Ba3 are Dhofar Integrated Services Company (DISC), Majan Electricity Company (MJEC), Mazoon Electricity Company (MZEC), Muscat Electricity Distribution Company (MEDC), Oman Electricity Transmission Company (OETC), Oman Power and Water Procurement Company (OPWP), and Oman Telecommunications Company (Omantel), Moody's said in a note on Friday.

The rating actions follow Moody's decision to upgrade Oman's government bond rating to Ba2 from Ba3, with a positive outlook.

The upgrade reflects the close interlinkage of entities – except the telecoms operator Omantel – with the sovereign rating because of their “significant exposure to the Omani government in the form of subsidies”, Moody's said.

“The liquidity of DISC, MJEC, MZEC, MEDC and OPWP remains weak because of their continued reliance on short-term funding in the form of working capital facilities,” Moody's added.

“MJEC, MZEC, DISC and OETC will also continue to face high capital spending in the next 12 to 18 months with associated funding requirements and increases in leverage.”

The rating agency said it would also monitor the impact of the reorganisation of the distribution and supply companies on the capital structures of the entities and their ability to optimise their capital spending.

Oman launched a three-year fiscal stability programme in October to add to the momentum of the sultanate’s economic recovery from the pandemic-driven slowdown and support the development of the country’s financial sector.

The sultanate also signed agreements with its Gulf Co-operation Council neighbours to boost its economy and create jobs, including a $3 billion railway network linking Oman with the UAE and a $320 million infrastructure development project with the Saudi Fund for Development.

Oman, the largest non-Opec producer in the Middle East, expects a budget deficit of 1.3 billion rials ($3.37 billion) in 2023, or 3 per cent of its economy, after achieving a surplus of 1.14 billion rials for 2022, the Ministry of Finance said in January.

Omantel, which is a leading integrated telecoms service provider in Oman, is supported by several growth drivers including the company’s strong market position, resilient demand for its services and exposure to other Middle East and African markets, Moody's said.

The ratings agency said its positive outlook for Omantel is in line with that of the government.

It expects the company to demonstrate resilient financial performance, reduce leverage and improve liquidity over the next 12 to 18 months.