Ranking Motion: Moody’s affirms the scores of stc and SEC; withdraws BCAsGlobal Credit score Analysis – 17 Mar 2022Madrid, March 17, 2022 — Moody’s Traders Service (“Moody’s”) has as we speak affirmed the A1 scores of Saudi Telecom Firm (“stc”) and the A1 scores of Saudi Electrical energy Firm (“SEC”). The outlook on stc’s and SEC’s scores stays secure. Concurrently, Moody’s has withdrawn stc’s a1 baseline credit score evaluation (BCA) and SEC’s baa1 BCA, as a result of it not classifies stc and SEC as Authorities-Associated Issuers (GRIs). This follows Moody’s task of scores to stc’s and SEC’s mum or dad firm Public Funding Fund (PIF, A1 secure).Please click on on this hyperlink https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL464041 for the Checklist of Affected Credit score Scores. This listing is an integral a part of this Press Launch and identifies every affected issuer.RATINGS RATIONALEOn 7 February 2022, Moody’s assigned a first-time issuer ranking to PIF below the Authorities-Associated Issuers Methodology. PIF owns 64% of stc and 74.3% of SEC and is 100% owned by the Authorities of Saudi Arabia (A1 secure). Moody’s not charges stc and SEC below the GRI Methodology as a result of Moody’s doesn’t usually designate subsidiaries of a GRI as additionally being GRIs. The elimination of the GRI standing has no ranking implications on stc and SEC and their scores have been affirmed accordingly. Moody’s will proceed to think about any advantages from oblique authorities possession in addition to help from PIF as a strategic shareholder on a qualitative foundation.stc’s ranking didn’t profit from any uplift below the GRI methodology, as the corporate has a standalone evaluation which has the traits of a powerful A profile. However, stc’s issuer ranking displays the corporate’s strategic significance to PIF and subsequently the Authorities of Saudi Arabia. The affirmation of stc’s A1 scores displays stc’s (1) stable monetary profile, as illustrated by its persistently low debt/ EBITDA of under 1.0x; (2) main place within the home market, the place it holds a market share of round 70%; (3) robust EBITDA margin within the 35%-40% vary on a constant foundation; and (4) robust liquidity regardless of excessive dividend funds. It additionally considers (1) the focus to and rising aggressive nature of the telecom market within the Kingdom of Saudi Arabia (KSA); (2) the saturation in KSA’s cell section; and (3) the low combination income contribution of round 8% from worldwide operations in 2021.SEC’s A1 scores incorporate a standalone evaluation which has the traits of a powerful Baa profile. The issuer ranking displays SEC’s continued strategic significance to PIF, and subsequently the Authorities of Saudi Arabia. SEC’s standalone evaluation is supported by the low enterprise danger profile of its built-in electrical energy actions and its dominant market place in Saudi Arabia and continued ongoing help from the federal government together with gasoline and different types of subsidies. Since 1 January 2021, SEC operates below a brand new regulated asset base framework that’s clear and supportive. SEC’s A1 scores additionally displays a rising debt load as substantial investments are incurred to fulfill the rising demand for electrical energy in Saudi Arabia.OUTLOOKThe secure outlook on stc’ scores assumes that the metrics of stc will proceed to be commensurate with its A1 issuer ranking over the subsequent 18 months. The outlook additionally considers the corporate’s main place within the Saudi Arabian telecommunications companies market.The secure outlook on SEC’s scores displays the corporate’s low enterprise danger profile and considers the numerous credit score linkages between SEC and PIF and the federal government.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSstc’s ranking might come below constructive stress if PIF’s or the Authorities of Saudi Arabia’s ranking is upgraded.With a standalone with traits of a powerful A profile, the corporate is now one of many highest rated telecom operators on a standalone foundation globally. The chance of the standalone evaluation enhancing to an Aa profile is low, as a result of firm’s scale and focus in Saudi Arabia. Any enhance in scale outdoors of Saudi Arabia, in markets with decrease sovereign scores or the place the regulatory framework is much less supportive in comparison with Saudi Arabia, might outcome within the firm diluting the good thing about its robust and main place in its home market.stc’s issuer ranking could be downgraded if PIF’s or the Authorities of Saudi Arabia’s ranking had been to be downgraded.Downward stress on stc’s ranking might outcome from a fabric deterioration within the firm’s monetary profile on account of elevated competitors, debt-financed acquisitions or sustained intervals of adverse free money move because of this, as an illustration, of upper capital spending or dividend payouts that trigger the corporate’s debt/EBITDA to materially exceed 1.5x on a sustained foundation and its retained money move/debt to lower under 40% on a sustained foundation. This steerage incorporates Moody’s assumptions of parental help from PIF which might mitigate some weakening of stc’s standalone profile.SEC’s scores might be upgraded if the PIF’s ranking or the Authorities of Saudi Arabia’s was upgraded. This might additionally require no materials deterioration within the firm’s working and monetary efficiency and a superb monitor report below the brand new regulatory regime.SEC’s scores might be downgraded if PIF’s or the Authorities of Saudi Arabia’s scores had been to be downgraded. The ranking may be downgraded due to a discount in Moody’s assumption of parental help or if SEC’s credit score profile weakens such that (CFO pre-WC + curiosity)/curiosity is sustained under 3.0x and (CFO pre-WC – dividends)/debt, excluding the shareholder instrument from debt, is sustained under 15%.PRINCIPAL METHODOLOGYThe principal methodology utilized in ranking Saudi Telecom Firm and STC Sukuk Firm Restricted was Telecommunications Service Suppliers printed in January 2017 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1055812. The principal methodology utilized in ranking Saudi Electrical energy Firm, Saudi Electrical energy International SUKUK Firm, Saudi Electrical energy International SUKUK Firm 2, Saudi Electrical energy International SUKUK Firm 3, Saudi Electrical energy International SUKUK Firm 4 and Saudi Electrical energy International SUKUK Firm 5 was Regulated Electrical and Fuel Utilities printed in June 2017 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1072530. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a replica of those methodologiesThe native market analyst for Saudi Telecom Firm and STC Sukuk Firm Restricted scores is Julien Haddad, +971 (423) 795-39.The native market analyst for Saudi Electrical energy Firm, Saudi Electrical energy International SUKUK Firm, Saudi Electrical energy International SUKUK Firm 2, Saudi Electrical energy International SUKUK Firm 3, Saudi Electrical energy International SUKUK Firm 4 and Saudi Electrical energy International SUKUK Firm 5 is Thomas Le Guay, +971 (423) 795-45.COMPANY PROFILESstc is the main built-in telecommunications and ICT service supplier within the KSA. After the liberalization of the native telecommunications market, stc expanded throughout the Center East, and Southeast Asia. Internationally, the corporate primarily operates in Bahrain and Kuwait, and thru its affiliate in Malaysia. The corporate reported whole income of SAR63.4 billion ($16.9 billion) and a internet revenue of SAR11.6 billion ($3.1 billion) in 2021.SEC is the dominant vertically built-in electrical energy utility in Saudi Arabia, the place it served over 10.4 million clients as of 30 September 2021. The corporate owns 42 main vegetation with a era capability of 54.5 Gigawatts (GW) and has curiosity in joint ventures with era capability of an extra 15.6 GW, representing the overwhelming majority of Saudi Arabia’s era capability. The Saudi authorities not directly owns 81.2% of SEC, together with 74.3% immediately via PIF and 6.9% via Saudi Arabian Oil Firm (Saudi Aramco, A1 secure). The remaining 18.8% is listed on the Saudi Inventory Change. The corporate reported consolidated revenues of SAR74.5 billion ($19.9 billion) within the 12 months to 30 September 2021 and SAR477.8 billion in property ($127.4 billion) as of 30 September 2021.REGULATORY DISCLOSURESThe Checklist of Affected Credit score Scores introduced listed here are all solicited credit score scores. For added data, please discuss with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores obtainable on its web site www.moodys.com. Moreover, the Checklist of Affected Credit score Scores contains further disclosures that change with regard to a few of the scores. Please click on on this hyperlink https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL464041 for the Checklist of Affected Credit score Scores. This listing is an integral a part of this Press Launch and gives, for every of the credit score scores coated, Moody’s disclosures on the next objects: Ranking Solicitation Issuer Participation Participation: Entry to Administration Participation: Entry to Inner Paperwork Endorsement Lead Analyst Releasing Workplace For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions might be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For scores issued on a program, collection, class/class of debt or safety this announcement gives sure regulatory disclosures in relation to every ranking of a subsequently issued bond or observe of the identical collection, class/class of debt, safety or pursuant to a program for which the scores are derived solely from present scores in accordance with Moody’s ranking practices. For scores issued on a help supplier, this announcement gives sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the help supplier’s credit standing. For provisional scores, this announcement gives sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive ranking in a way that may have affected the ranking. For additional data please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose scores might change on account of this credit standing motion, the related regulatory disclosures shall be these of the guarantor entity. Exceptions to this strategy exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking overview.Moody’s basic rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation might be discovered at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The under contact data is supplied for data functions solely. Please see the scores tab of the issuer web page at www.moodys.com, for every of the scores coated, Moody’s disclosures on the lead ranking analyst and the Moody’s authorized entity that has issued the scores.The related workplace for every credit standing is recognized in “Debt/deal field” on the Scores tab within the Debt/Deal Checklist part of every issuer/entity web page of the web site.Please see www.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.Please see the scores tab on the issuer/entity web page on www.moodys.com for added regulatory disclosures for every credit standing. Carlos Winzer Senior Vice President Company Finance Group Moody’s Traders Service Espana, S.A. 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