Abu Dhabi National Energy Co. 'AA-/A-1+' ratings affirmed on proposed PrimeWest purchase

"The affirmation reflects our expectation of ongoing implicit sovereign support for TAQA given the company's importance to the Emirate of Abu Dhabi (AA/Stable/A-1+) and its status as a government-related entity," said Standard & Poor's credit analyst Jonathan Manley.

The ratings continue to be based on a "top-down" rating approach, which takes the sovereign rating as the starting point of the analysis, reflecting the company's position as a key entity in Abu Dhabi's economy and its importance as a national vehicle for global investment and public policy.

Following the PrimeWest acquisition, up to one-half of the company's forecast EBITDA will likely be generated outside of the United Arab Emirates (UAE). This is consistent with the company's originally stated investment policy to undertake international infrastructure investments.

"Our opinion remains that, in a financial stress scenario, unlike the company's UAE-based assets that are, for example, critical to the provision of water and power to the Emirate, non-UAE activities may not receive the same level and timeliness of sovereign financial support," Mr. Manley said.

"In respect of this specific acquisition, however, Standard & Poor's has analyzed the extent and timing of support that could be forthcoming in the event of a stress scenario," added Mr. Manley. "In this case, we understand that it is the Emirate's intention to treat these non-UAE assets in the same manner as those in the UAE."

In addition, the Emirate's review of all acquisitions (including that proposed for PrimeWest) and the proposed corporate structure of the acquisition within the overall TAQA group of companies further substantiate the sovereign's likely support for these assets. No explicit guarantee has been provided, however.

Standard & Poor's expects that there will be no major changes in the implicit government support to the company as a government-related entity. This implies that the state will support TAQA in the event of financial distress should existing or future investments not perform in line with expectations. The outlook also assumes that the company will execute its business plan successfully and meet its financial forecasts.

The rating would be raised, or the outlook revised to positive, if there is a similar change in the rating or outlook on the sovereign, or in the case of enhanced sovereign support. The rating would be lowered, or the outlook revised to negative, if there is any weakening of sovereign support for the company or if the underlying consolidated credit quality of the investment portfolio reduces.