Fitch lowers OETC, Omantel and Mazoon ratings; outlooks stable

Muscat - 

Fitch Ratings has downgraded Oman Electricity Transmission Co’s (OETC), Mazoon Electricity Co’s and Omantel’s long-term foreign currency issuer default ratings to ‘BB+’ from ‘BBB-’.

Fitch has also downgraded OETC’s and Mazoon’s local currency issuer default ratings to ‘BB+’ from ‘BBB-’. The outlooks on all the issuer default ratings are stable, Fitch Ratings said in a statement.

It said the rating actions on all three companies follow the recent downgrade of Oman’s long-term foreign and local-currency issuer default ratings to ‘BB+’ from ‘BBB-’ with stable outlook.

Fitch’s assessment of the ‘BBB-’ standalone credit profiles of OETC, Mazoon and Omantel remain unchanged.

OETC’s, Mazoon’s and Omantel’s ratings are assessed using Fitch’s government-related entities rating criteria. ‘Their standalone credit profiles are higher than the Oman sovereign rating of ‘BB+’. We do not envisage them to be rated higher than the sovereign’s, given the moderate-to-strong legal and operational linkages between the government and each separate company. Changes to the sovereign rating would therefore likely be reflected in the ratings of OETC, Mazoon and Omantel’, the ratings agency said.

Fitch said the ratings of OETC, Mazoon and Omantel are capped by the Oman’s sovereign rating. A positive rating action on Oman would lead to positive rating actions on OETC, Mazoon and Omantel provided their standalone credit profit remain at ‘BBB-’, it added.

Fitch said the main factors that could lead to positive rating action on Oman’s sovereign rating are: Narrowing of the budget deficit resulting in stabilisation of the government debt/GDP, for example as a result of an improved fiscal policy framework; and sustainable reduction of net external debt/GDP.

The main factors that could lead to negative rating action on Oman are: Continued increases in government debt/GDP or drawdown in assets, for example due to a failure to shrink the budget deficit; and continued increases in net external debt/GDP, Fitch said.

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