DOHA: Citing the stable credit ratings of Qatar Petroleum (QP) and Industries Qatar (IQ) S&P Global Ratings noted yesterday that the larger Government-Related Entities (GREs) in the GCC are better positioned to withstand the oil price pressures.
The region’s larger state-owned oil and gas and petrochemical companies such as QP, IQ and International Petroleum Investment co, have seen their credit ratings maintained despite the downturn in commodity and measures to introduce reform liking lifting of subsidies, the ratings agency said in its just published report.
The report said that it considers the structural shift in the energy markets now well and truly established, and GCC governments on a path to addressing the fiscal deficits through various forms of expenditure reform. “This will have both direct and indirect implications for practically all our issuers in the region,” said S&P Global Ratings credit analyst Karim Nassif.
In 2016, S&P has already downgraded eight corporate and infrastructure GREs on the back of sovereign rating actions, and took negative rating actions on five companies that are directly exposed to the hydrocarbon industry. “As we look forward, corporate and infrastructure companies most able to operate successfully and deal with the implications of the reform agenda (higher taxes, lower subsidies) will be best able to wade out the transformational market changes that are occurring”, he said.
According to the global ratings agency, these are likely to be the large GREs with important mandates in the oil & gas, utilities, and telecom sectors, for instance, as well as private corporate and infrastructure companies that are leaders in their respective fields, have adopted conservative funding strategies, and are not dependent on subsidies and government hand-outs for their operations. “
“We have not yet seen a trend for governments to prompt their GREs to lever up to increase shareholder distribution, and this has been a key underpinning to rating performance. Sectors that have been hit the hardest so far include the private sector oil & gas and construction industries,..”.
