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Rating Action:

Moody's affirms the Aa3 senior secured bond ratings of RasGas II-3, outlook remains stable

17 Jun 2015

London, 17 June 2015 -- Moody's Investors Service, has today affirmed the Aa3 senior secured bond ratings of Ras Laffan Liquefied Natural Gas Company Limited (II) (RasGas II) and Ras Laffan Liquefied Natural Gas Company Limited (3) (RasGas 3) (together, RasGas II-3, the Project). The outlook remains stable. The baseline credit assessment (BCA), which lies in the baa1-baa3 range, was also affirmed.

RATINGS RATIONALE

Today's affirmation reflects, inter alia, our continued expectation of high support from the Government of Qatar. We consider the RasGas II-3 entities as government-related issuers (GRIs). The Aa3 rating for the senior secured bond ratings incorporates our assumption that in the unlikely event that RasGas II-3 were to become distressed, there would be a high likelihood of extraordinary support from the Government of Qatar to avoid RasGas II-3 defaulting on its debt obligations. Our assumption of high support leads to a significant uplift from the standalone credit strength of the Project.

A measure of this standalone credit strength, our BCA for RasGas II-3 lies within a range of baa1-baa3 and reflects (1) the Project's compelling commercial and industrial rationale, and the strong competitive position that it enjoys as a world class, low-cost producer of LNG and valuable by-products; (2) its very strong financial metrics, even in the current low oil price environment; and (3) its generally beneficial project finance structural features, subject to the absence of certain security interests and subject to limitations on the likely effectiveness of certain creditor projections.

However, our BCA for RasGas II-3 is constrained by (1) event risk considerations, including asset-concentration risk and geopolitical risk; and (2) the Project's exposure to commodity price risk, although such risks are substantially mitigated by its strong financial metrics.

The BCA was previously constrained by the complexity of the plant, equipment and industrial process, combined with the relatively short operating histories of two of the LNG liquefaction trains (six and seven), which faced technology risk. At this point all trains have over five years of operating history, with all operating at very high levels. We no longer view this as a key rating constraint.

The Project's historic average debt service cover ratio (DSCR) is in excess of 10x. The ratio fell to 6.1x in 2014 however, due to a $1.1 billion bond principal repayment. The DSCR is expected to be lower in future due to (1) the lower commodity price environment and (2) further significant bond maturities. Nonetheless, we expect the minimum and average DCSR to continue to be strong, and higher than most rated projects, even under Moody's calculated DSCR, which includes the capital element of shipping charter payments in debt service.

RATIONALE FOR STABLE OUTLOOK

The stable rating outlook reflects the stable outlook of the sovereign rating of the Government of Qatar.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's would consider upgrading the rating if there was an upgrade of the sovereign rating of the Government of Qatar.

Moody's would consider downgrading the rating if there was a downgrade of the sovereign rating of the Government of Qatar. Moody's could also downgrade the rating if there is a weakening in our assumption of high support.

PRINCIPAL METHODOLOGY

The methodologies used in these ratings were Generic Project Finance Methodology published in December 2010. Other methodologies used include the Government-Related Issuers methodology published in October 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

COMPANY PROFILE

RasGas II and RasGas 3 are LNG liquefaction companies in Qatar. The Project engages in the upstream production of natural gas, gas treatment and liquefaction, and the export of natural gas in liquid form. RasGas II-3 has successfully developed five LNG liquefaction trains, which now produce 29.7 million tonnes of LNG per annum, representing 13% of worldwide production. RasGas II-3 also produces a number of other valuable by-products in conjunction with LNG, including condensates and liquefied petroleum gas (LPG).

We consider RasGas II-3 as a single entity from a credit perspective since all senior secured debt raised by RasGas 3 is unconditionally and irrevocably guaranteed by RasGas II, and vice versa. All such senior debt raised by the companies ranks pari passu, and is secured against a project finance security package. Secured creditors also benefit from project finance structural features.

The ultimate shareholders of each of RasGas II and RasGas 3 are Qatar Petroleum (70%, Aa2 stable) and Exxon Mobil Corporation (30%, Aaa stable).

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Tomas O'Loughlin
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Douglas Segars
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms the Aa3 senior secured bond ratings of RasGas II-3, outlook remains stable
No Related Data.
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