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Rating Action:

Moody's affirms the ratings of TAQA and SENAAT; withdraws BCAs

07 Jul 2021

London, 07 July 2021 -- Moody's Investors Service ("Moody's") has today affirmed the Aa3 ratings of Abu Dhabi National Energy Company ("TAQA") and the A3 ratings of General Holding Corporation PJSC (SENAAT). The outlook on TAQA's ratings remains stable, while that on SENAAT's remains negative.

Concurrently, Moody's has withdrawn TAQA's baa1 baseline credit assessment (BCA) and SENAAT's ba1 BCA because it no longer classifies TAQA and SENAAT as Government-Related Issuers (GRI). This follows Moody's assignment of ratings to TAQA and SENAAT's parent company Abu Dhabi Developmental Holding Company PJSC (ADQ, Aa2 stable).

Full details of the rating actions for the affected entities can be found at the end of this press release.

RATINGS RATIONALE

On 21 June 2021, Moody's assigned a first-time issuer rating to ADQ under the Government-Related Issuers (GRI) Methodology. ADQ owns 98.6% of TAQA and 100% of SENAAT and is 100% owned by the Government of Abu Dhabi (Aa2 stable). As a result, Moody's no longer rates TAQA and SENAAT under the GRI Methodology as Moody's does not normally designate subsidiaries of a GRI as also being GRIs. The removal of the GRI status has no rating implications on TAQA and SENAAT and their ratings have been affirmed accordingly. Moody's will continue to consider any benefits from indirect government ownership as well as support from ADQ as a strategic shareholder on a qualitative basis.

TAQA's Aa3 ratings incorporate a standalone assessment which has the characteristics of a strong Baa profile, but also multi-notch uplift reflecting TAQA's continued strategic importance to ADQ, and therefore, the Government of Abu Dhabi.

TAQA's standalone assessment is supported by the stable and transparent regulatory framework for the transmission and distribution of electricity and water in Abu Dhabi, the cost-recovery mechanisms of the regulatory framework and timeliness of subsidy payment. It is also supported by the low business risk profile of the company's power and water activities, and its monopoly position in the emirate of Abu Dhabi. TAQA's standalone assessment reflects credit metrics in the Baa range as well as the volatility in the company's oil and gas operations, which represented 5% of proforma EBITDA in 2020.

SENAAT's A3 ratings incorporate a standalone assessment which has the characteristics of a strong Ba profile. The issuer rating reflects SENAAT's continued strategic importance to ADQ, and therefore, the Government of Abu Dhabi with ADQ actively managing the company both on the strategic and operational sides.

SENAAT continues to face a challenging, albeit improving, operating environment and its ratings remain weakly positioned with Moody's adjusted debt to EBITDA increasing to 9.6x in 2020 from 4.4x in 2019, above Moody's guidance for a downgrade of 4.5x. Moody's expects leverage to decrease in 2021, as the economies in the GCC region recover somewhat in 2021. However, there remains uncertainty on the pace of economic recovery.

In addition, SENAAT's portfolio has been evolving over the course of the last 12 months. The company has already completed two transactions in the first half of 2021 and could complete a third one by the end of the year. Moody's will monitor the impact of those transactions on SENAAT's credit profile over the course of the next 12-18 months. The completed transactions are (1) Agthia Group PJSC's acquisition of Al Foah Company LLC and Nabil Foods, a Jordanian based producer of processed protein products, which resulted in an increase of SENAAT's share in Agthia to 62.9% from 51%; and (2) SENAAT offering the entirety of its shares in National Petroleum Construction Company to National Marine Dredging Company PJSC (NMDC), against shares in the latter representing 48.8% share in NMDC's capital; SENAAT then disposed 34.7% of its stake in NMDC, reducing its shareholding to 14.28%. SENAAT will not be consolidating NMDC going forward.

SENAAT's standalone assessment continues to be underpinned by (1) a degree of industry diversification through ownership in several mature companies; (2) a supportive domestic environment where long term economic growth in Abu Dhabi will continue to benefit SENAAT's portfolio companies; and (3) a strong liquidity profile with a USD400 million RCF at the holdco level, which remained undrawn as of December 2020.

At the same time, the standalone assessment also reflects (1) high revenue and asset concentration exposure to the United Arab Emirates (UAE); (2) small scale of operations of individual businesses relative to global peers; (3) significant investment concentration to Emirates Steel which is operating in a cyclical industry and has been hit by COVID in 2020; and (4) SENAAT's high leverage for the rating with limited track record of maintaining credit metrics at levels defined under the company's financial policy.

OUTLOOK

The stable outlook on TAQA's ratings reflects the low business risk profile of its power and water activities and links to the Abu Dhabi government in the form of subsidy payments.

The negative outlook on SENAAT's ratings reflects the challenging operating environment that its subsidiaries are currently facing with leverage not expected to go back to pre-COVID levels before 2022.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

TAQA's ratings could be upgraded as a result of an upgrade of ADQ's rating, or of an improvement in the perceived importance of TAQA for ADQ.

TAQA's ratings could be downgraded as a result of a reduction in Moody's assumption of parental support. For instance, in case of adverse changes in regulation and oversight by the government or a significant reduction in TAQA's indirect ownership by the government of Abu Dhabi. A material deterioration in TAQA's financial profile, or a significant increase of the contribution of unregulated businesses to the company's cash flows could also lead to a downgrade of TAQA's ratings.

SENAAT's ratings are unlikely to be upgraded in the near term given the negative outlook. As with TAQA, SENAAT's ratings could be upgraded or downgraded if there is a change in ADQ's rating or a strengthening or weakening in the expectation of support from ADQ and the government of Abu Dhabi. The negative outlook reflects that SENAAT's ratings are more vulnerable to a change in the standalone credit quality, and the greater impact of the pandemic. The standalone assessment could weaken if the deleveraging path towards a gross debt to EBITDA of 4.5x is slower than anticipated in the first half of 2021. Moody's could also downgrade SENAAT's ratings if group and/or holding company liquidity weakens.

LIST OF AFFECTED RATINGS

Affirmations:

..Issuer: Abu Dhabi National Energy Company

....LT Issuer Rating, Affirmed Aa3

....ST Issuer Rating, Affirmed P-1

....Senior Unsecured MTN, Affirmed (P)Aa3

....Senior Unsecured Regular Bond/Debenture, Affirmed Aa3

..Issuer: General Holding Corporation PJSC (SENAAT)

....LT Issuer Rating, Affirmed A3

..Issuer: SENAAT Sukuk Limited

....BACKED Senior Unsecured MTN, Affirmed (P)A3

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed A3

Outlook Actions:

..Issuer: Abu Dhabi National Energy Company

....Outlook, Remains Stable

..Issuer: General Holding Corporation PJSC (SENAAT)

....Outlook, Remains Negative

..Issuer: SENAAT Sukuk Limited

....Outlook, Remains Negative

PRINCIPAL METHODOLOGY

The principal methodology used in rating Abu Dhabi National Energy Company was Regulated Electric and Gas Utilities published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530. The principal methodology used in rating General Holding Corporation PJSC (SENAAT) and SENAAT Sukuk Limited was Investment Holding Companies and Conglomerates published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1125855. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

The local market analyst for Abu Dhabi National Energy Company ratings is Thomas Le Guay, +971 (423) 795-45. The local market analyst for General Holding Corporation PJSC (SENAAT) and SENAAT Sukuk Limited ratings is Julien Haddad, +971 (423) 795-39.

COMPANY PROFILES

TAQA is the vertically integrated power and water utility of the emirate of Abu Dhabi, UAE. The company owns and operates the emirate's power and water transmission and distribution networks, and almost all of the power and water generation plants. TAQA also has international power generation assets, and oil and gas businesses. Its activities are spread in the UAE and countries in the Middle East, North America, Europe, Africa and the Indian subcontinent. The Government of Abu Dhabi indirectly owns 98.6% of the company, primarily through ADQ, and the remaining shareholding (1.4%) is in free float. TAQA's pro forma revenues and EBITDA, including the asset transfer, were AED41 billion and AED16 billion respectively, for 2020.

General Holding Corporation PJSC (SENAAT) is an industrial group wholly-owned by the ADQ and headquartered in Abu Dhabi, UAE. SENAAT has a number of mature subsidiaries, namely Emirates Steel Industries PJSC (ESI, integrated steel producer), Agthia Group PJSC (food and beverage company), Arkan Building Materials PJSC (cement and building materials) and Al Foah Company LLC (producer and marketer of dates). Notable non-consolidated joint-ventures and associates include a 48.9% ownership in National Marine Dredging Company (NMDC), a 50% ownership in Dubai Cable Company (Private) Limited (Ducab, a profitable company that manufactures power cables) and a 51% stake in Al Gharbia Pipe Company LLC (AGPC, large-diameter steel pipes). For year-end 31 December 2020, the company recorded AED12.8 billion ($3.5 billion) of revenues, AED0.9 billion ($250 million) of Moody's adjusted EBITDA.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

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.

Julia Pribytkova
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Mario Santangelo
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
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JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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