Moody's has today assigned a definitive Aa3 rating to USD3.9 billion of 10-year amortising senior secured debt (the Senior Debt) due 2019 raised by Dolphin Energy Limited (DEL), a company incorporated in Abu Dhabi. The rated Senior Debt comprises a USD 1.420 billion bank debt facility, supplemented by USD 1.250 billion bonds and USD1.225 billion of co-lending by the project's sponsors (Affiliate Debt). DEL has also raised a USD 218 million bank debt facility insured by SACE, Italy's Export Credit Agency; this debt is not rated. The outlook on the rating is stable.
The rating is in line with the P(Aa3) rating assigned on 15 July 2009. Moody's understands that the Senior Debt will be used mainly to refinance existing debt in the Dolphin project, an integrated gas production and distribution project to deliver gas from Qatar's North Field to customers principally in Abu Dhabi, Dubai and Oman, which commenced operation in July 2007. The project's sponsors are Mubadala Development Company PJSC (Mubadala, Aa2/stable), Total SA (Aa1/stable) and Occidental Petroleum Corporation (A2/stable). As Mubadala holds 51% of DEL's equity through a holding company and the Government of Abu Dhabi has committed to maintain effective ownership of this majority stake for the life of the project, Moody's has classified DEL as a Government Related Issuer (GRI).
"At USD 4.1 billion, Dolphin's total debt level is unchanged from our Pre-Sale Report published on 15 July. It now comprises USD 3.9 billion of Senior Debt rated Aa3/stable, and USD 218 million of SACE debt which is not rated," says William Coley, a Vice President-Senior Analyst in Moody's Global Infrastructure Group. "Based on the actual financing terms achieved, including a larger than expected bond tranche of USD 1.250 billion, senior debt cover ratios have improved slightly from the levels shown in our Pre-Sale Report, with the average Debt Service Cover Ratio improving from 2.44x to 2.48x."
Under its GRI methodology, Moody's has assigned a Baseline Credit Assessment (BCA) of 8 (equivalent to Baa1) to the Senior Debt, and considered the probability of support for DEL from Mubadala and the degree of dependence between the two. Support and dependence are both assessed as high, which is sufficient to deliver a four-notch uplift from the BCA of 8 to the Aa3 rating, one notch below that of Mubadala and the Abu Dhabi Government. The BCA of 8 reflects credit strengths that include the project's established operational status, with a short but satisfactory record of successful production; limited and manageable exposure to construction risk; a conservative financing structure, with a 10-year debt tenor for a project with at least 23 years to run; and the presence of long-term committed gas offtake contracts with government-related entities in Abu Dhabi, Dubai and Oman, which provide an unusual degree of resilience to downside hydrocarbon pricing
sensitivities, especially from 2012 onwards. Credit challenges include a degree of freedom under the financing agreements to raise Supplemental and Additional Debt, which would then rank pari passu with the initial Senior Debt, weakening its credit metrics, and DEL's unusual freedom to replace cash in charged accounts with Acceptable Credit Support or Permitted Investments, which would represent a material credit weakness if DEL was not such a strongly-supported GRI.
