By Satish Kanady
DOHA: Moody’s Investors Service has confirmed the Aa3 guaranteed senior secured debt ratings of Ras Laffan Liquefied Natural Gas Co. Ltd (II) (RasGas II) and Ras Laffan Liquefied Natural Gas Co. Ltd (3) (RasGas 3). Moody’s has also confirmed the Aa3 senior secured debt ratings and the A1 senior subordinated debt rating of Nakilat Inc (Nakilat). The outlook on the ratings is negative. This concluded the reviews for downgrade that were initiated on 9 March 2016.
The rating actions follow Moody’s 14 May confirmation of the Aa2 government bond and issuer ratings of Qatar, with negative outlook, and reflects that each of RasGas II, RasGas 3 and Nakilat is a government related issuer (GRI). The ratings of RasGas II, RasGas 3 and Nakilat incorporate Moody’s assumption that in the unlikely event that any of these issuers were to become distressed, there would be a high likelihood of extraordinary support from the Government of Qatar to avoid a default on their debt obligations. Moody’s assumption of high support leads to a significant uplift from the standalone credit strength, or baseline credit assessment (BCA), of the projects.
As part of Moody’s review, the rating agency assessed the impact of sustained low oil prices on the standalone credit strength of RasGas II, RasGas 3 (together RasGas II-3) and Nakilat, and affirmed the BCA for each of them. Moody’s expects that the standalone credit strength of RasGas II-3 will, as a result of strong base case financial metrics, be resilient in a low hydrocarbon price environment. The rating agency estimates that the minimum debt service cover ratio (DSCR) breakeven oil price for RasGas II-3 is below $15 per barrel. In the case of Nakilat, the availability-based revenues payable under long-term time charter party agreements ensure that Nakilat’s revenues are not exposed to commodity price volatility.
The BCA for RasGas II-3 lies within a range of baa1-baa3 and reflects the Project’s compelling commercial and industrial rationale, and the strong competitive position that it enjoys as a world class, low-cost producer of liquefied natural gas (LNG) and valuable by-products’ its very strong financial metrics, even in the current low oil price environment; 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; event risk considerations and the Project’s exposure to commodity price risk, although such risks are substantially mitigated by its strong financial metrics.
The BCA for Nakilat is a1 and reflects the critical importance of its vessels to their liquefaction company charterers, high quality net cash flows, underpinned by charter payments that are highly resilient and well matched to operating costs and debt service costs; financial metrics capable of supporting long tenor project finance debt; generally beneficial project finance structural features and a number of technological innovations compared to conventional LNG vessels; and exposure to refinancing risk arising from the bullet maturities of certain Program Debt facilities, within the term of the financing.
Moody’s would consider upgrading the ratings if there was an upgrade of the sovereign rating. Moody’s would consider downgrading the ratings if there was a downgrade of the sovereign rating of the Government of Qatar. Moody’s could also downgrade the ratings if their assumption of high support weakens.
The Peninsula
