Moody's affirms Masdar's A2 rating and maintains stable outlook

A solar farm at Masdar City in Abu Dhabi. Masdar's rating could be upgraded if the deal to expand its shareholder base enhances the quality of renewable energy assets. AFP

Moody’s Investors Service affirmed the A2 long-term issuer rating of Abu Dhabi Future Energy Company, better known as Masdar, and maintained its stable outlook as an expanded shareholder base strengthens the renewable power company's business.

An A2 rating is sixth-highest credit rating issued by Moody's and indicates low credit risk.

Earlier this month, Adnoc and Taqa said they would join Mubadala Investment Company to become shareholders in Masdar, which will help boost the clean energy company's renewable power capacity to more than 50 gigawatts by 2030.

The renewable electricity assets and development pipelines of the companies will be combined, with Taqa and Adnoc taking 43 per cent and 24 per cent, respectively. Mamoura Diversified Global Holding, a subsidiary of Mubadala, will hold a 33 per cent stake in the combined entity.

The green hydrogen investments of all the stakeholders will also be consolidated under Masdar, with Adnoc taking a 43 per cent stake while Mubadala and Taqa hold 33 per cent and 24 per cent, respectively.

"The proposed reorganisation is intended to create a larger and more strongly capitalised renewable energy business able to achieve a gross target of at least 50 gigawatts of renewable capacity by 2030, compared to Masdar's operational gross capacity of 4.1 gigawatts as of December 2020," Moody's said.

"Any cash contributed or future commitments made as part of the transaction may support this growth, and the expanded shareholder base may increase the scope for future equity investments."

The expanded shareholder base also indicates the company's strategic importance to Abu Dhabi government and reinforces the ratings agency's expectation that the government will provide support to maintain Masdar's credit quality if needed.

Currently, Moody's expects Masdar's credit quality to be supported by its ongoing projects, which are with financially strong partners, while the non-recourse nature of most of its debt "would insulate Masdar from financial distress at individual investments".

The company has also diversified across various geographies and has a long track record of developing renewable energy projects, which have helped its rating.

In October, Masdar and Iraq’s Ministry of Electricity and National Investment Commission agreed to work on the first phase of solar projects that will boost the country's goal of generating 20 per cent to a quarter of its energy from renewables, equal to 10 gigawatts to 12 gigawatts by 2030.

The agreement will build power stations in five locations across Iraq that will generate 1 gigawatt. The second phase of the agreement will add another 1 gigawatt of capacity.

Masdar is an early developer of renewables in Jordan. Last month, the kingdom, the UAE and Israel signed an agreement to develop a renewable energy and desalination plant in Jordan to mitigate climate change and add to the growth of clean energy in the country.

Masdar made its first overseas investment in a Jordanian wind farm in 2013. It also developed Baynouna, a 200MW single solar energy project located east of the capital Amman, which became operational in 2020.

Masdar's rating could be upgraded if the deal to expand its shareholder base enhances the quality of renewable energy assets held within the rated entity and if it materially improves Masdar's liquidity and its ability to access capital, Moody's said.

Masdar was issued its debut ratings by Moody's and Fitch in September this year. The Abu Dhabi company aims to strengthen the UAE’s position as one of the world’s leading exponents of green energy.

Masdar currently operates in more than 30 countries, with a total investment of about $20 billion.