Moody’s changes ratings outlook of two Qatari project finance issuers to positive

LONDON, Nov 10: Moody’s Investors Service (“Moody’s”) has today affirmed the A1 guaranteed senior secured debt rating of RasLaffan Liquefied Natural Gas Co.Ltd (3) () and the A1 senior secured debt rating and the A2 senior subordinated debt rating of Nakilat Inc. (Nakilat). The outlook on these issuers has been changed to positive, from stable.

A full list of affected ratings is provided towards the end of this press release.

Ratings rationale

Today’s rating actions follow Moody’s 2 November 2022 affirmation of the Aa3 government bond and issuer ratings of the Government of Qatar, and change in outlook to positive, from stable.

The rating actions on RasGas 3 and Nakilat reflect that each is a government related issuer (GRI) and that the ratings benefit from Moody’s assumption of extraordinary support, if required, from the Government of Qatar to avoid a default on their debt obligations, which leads to a significant uplift from the standalone credit strength, or Baseline Credit Assessment (BCA), of the projects.

The baa1 BCA for RasGas 3 is affirmed and reflects: (1) RasGas 3’s strong competitive position, (2) very strong financial metrics, even in a low oil and gas price scenario, (3) generally beneficial project finance structural features, although lacking certain security interests and subject to limitations on the likely effectiveness of certain creditor protections, (4) event risk considerations, including asset concentration risk and geopolitical risk and (5) exposure to oil and gas commodity price risk. The credit quality of the bonds, as captured in our A1 rating, reflects our assessment of a high likelihood of extraordinary support from the Government of Qatar, should it become necessary.

The a3 BCA for Nakilat is also affirmed and reflects (1) the critical importance of Nakilat’s vessels to their liquefaction company charterers, (2) high quality net cash flows, underpinned by charter payments that are highly resilient and well-matched to operating costs and debt service costs, (3) financial metrics capable of supporting long tenor project finance debt, (4) generally beneficial project finance structural features, (5) certain event risk considerations including exposure to force majeure risks potentially affecting the vessels and (6) exposure to refinancing risk arising from the bullet maturities of certain facilities.

Factors that could lead to an upgrade or downgrade of the ratings

Moody’s could upgrade the ratings if the sovereign rating of the Government of Qatar was upgraded.

Moody’s could downgrade the ratings if (1) the sovereign rating of the Government of Qatar was downgraded; or (2) its assumption of high support weakens.

Rationale for the positive outlook

The positive outlook reflects the positive outlook on Government of Qatar’s sovereign rating.

List of affected ratings

Affirmations:

■ Issuer: RasLaffan Liquefied Natural Gas Co.Ltd (3)

■ Baseline Credit Assessment, Affirmed baa1

■ BACKED Senior Secured Regular Bond/Debenture, Affirmed A1

■ Issuer: Nakilat Inc.

■ Baseline Credit Assessment, Affirmed a3

■ Senior Subordinated Regular Bond/Debenture, Affirmed A2

■ Senior Secured Regular Bond/Debenture, Affirmed A1

Outlook Actions:

■ Issuer: RasLaffan Liquefied Natural Gas Co.Ltd (3)

■ Outlook, Changed To Positive From Stable

■ Issuer: Nakilat Inc.

■ Outlook, Changed To Positive From Stable Principal methodology

The methodologies used in these ratings were Generic Project Finance Methodology published in January 2022 and available at https://ratings.moodys.com/api/rmc-documents/361401, and Government-Related Issuers Methodology published in February 2020 and available at https://ratings.moodys.com/api/rmc-documents/64864. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.

Company profiles

RasLaffan Liquefied Natural Gas Co. Ltd (3) (RL 3) operates in conjunction with its affiliate RasLaffan Liquefied Natural Gas Co. Ltd (II) (RL II), (together, RL II-3). RL II-3 engages in the upstream production of natural gas, gas treatment and liquefaction and the export of natural gas in liquid form. RL II-3 has successfully developed five liquefied natural gas (LNG) liquefaction trains, with total nameplate capacity of 29.7 million tonnes of LNG per annum, representing approximately 7.8% of globally traded LNG in 2021. RL II-3 also produces a number of other valuable hydrocarbon byproducts, including condensates and liquefied petroleum gas (LPG).

We consider RL II-3 as a single entity from a credit perspective since all senior secured debt raised by RL II is unconditionally and irrevocably guaranteed by RL 3, and vice versa. All such senior debt raised by the companies ranks paripassu, and is secured against a project finance security package. Secured creditors also benefit from project finance structural features.

The ultimate shareholders of each of RL II and RL 3 are QatarEnergy (70%, Aa3 positive) and Exxon Mobil Corporation (30%, Aa2 stable).

Nakilat Inc. was formed in April 2006 to be an intermediate special purpose holding company for a portfolio of wholly-owned special purpose companies, with each such company procuring the construction of an LNG carrier, and becoming that vessel’s owner following construction completion. The 25 vessels are contracted under long-term time charter party agreements with LNG liquefaction companies based at RasLaffan Industrial City in Qatar.

Nakilat is a wholly-owned subsidiary of Qatar Gas Transport Company Ltd. (Nakilat) Q.S.C. (QGTC), constituted under the laws of the Marshall Islands. Entities which are wholly-owned by the Government of Qatar own 21% of the share capital of QGTC (with an aggregate indirect economic interest of 24%).