In 2011, ratings agency Moody’s upgraded Dubai Electricity & Water Authority (Dewa) to Ba1/stable. This provided a boost to Dewa, which is in the process of tendering its first independent power project (IPP) at Hassyan. The winning bidder will need to raise commercial debt for the project in partnership with Dewa, which will be easier with an improved credit rating.

According Moody’s, Oman Power and Water Procurement Company (OPWP) is the most creditworthy utility in the Gulf with a baseline credit assessment (BCA) value of A1 and a final rating of A1. Saudi Electricity Company (SEC) and Qatar Electricity & Water Company (QEWC) are seen as similarly strong with BCAs of Baa1 and final ratings of A1 each. In the UAE, Abu Dhabi National Energy Company (Taqa) and Dewa have BCAs of Ba1 and Ba2 and final ratings of A3 and Ba1 respectively. All companies have a stable outlook, according to Moody’s.

The strength of the region’s utilities is largely down to strong government support as they are majority-owned, backed and controlled by their respective governments. Credit ratings are important to utilities in the Gulf. Due to the unabated rise in demand for power and water in the region, utilities are engaged in a constant drive to raise corporate and, in most cases, project financing to fund expansion plans.

While year-on-year capital expenditure declined slightly in 2010 and 2011 in the GCC, 2012 is set to see a return to growth. About $13bn expected to be spent in capital expenditure by Dewa, SEC, Taqa and QEWC, the vast majority of which will be spent by SEC.

While the support of the Saudi Arabian government and preferential fuel price work in favour of SEC’s creditworthiness, SEC’s commercial exposure is high because payment depends on actual consumption. For SEC, it is particularly important to maintain a strong credit profile as this will assist in financing its ambitious capacity building plans.