Moody’s advices GCC to realize energy prices

Gulf Cooperation Council (GCC) governments’ reforms of energy subsidies, including for electricity and water, will likely result in the strengthening of the utilities sector’s standalone credit quality,

Moody’s says in a report published on its official website on March 21.

“The low oil price environment could potentially lead to utilities facing higher funding costs in the future if bank lending were to become constrained. However, it is also adding momentum to existing efforts that are likely to improve GGC utilities’ standalone credit quality over time,” says Julien Haddad, an analyst at Moody’s said.

“We expect firms to benefit from greater operating efficiencies, which along with the tariff hikes could lead to a rationalisation of power consumption in the region and enable companies to enhance their capital expenditure planning.”

The report says that the low oil price environment is adding momentum to existing efforts that are likely to improve GGC utilities’ standalone credit quality over time. “These include improvements in operating efficiencies, which along with the tariff hikes, could lead to a rationalisation of power consumption in the region and enable companies to enhance their capital expenditure (capex) planning”.

Moody’s says that however, GCC utilities could face some short-term risks. The current macroenvironment in the GCC could potentially lead to utilities facing higher funding costs in the future if bank lending were to become constrained.

Source: Trend