Moody's assigns debut rating to Abu Dhabi's ADQ

State holding company has direct and indirect investments in 90 companies

Khalifa Port in Abu Dhabi. Kizad’s green ammonia project will be powered by a solar plant. Abu Dhabi Ports

Moody’s Investors Service assigned its third-highest investment grade rating to Abu Dhabi’s state holding company, ADQ, the same level given to the Abu Dhabi government.

ADQ, which ranks as the emirate’s third-largest fund after Abu Dhabi Investment Authority and Mubadala, was rated "Aa2" with a stable outlook by Moody’s.

“The Aa2 issuer rating and stable outlook are aligned with those of the government of Abu Dhabi because we believe ADQ is intrinsically linked to the government of Abu Dhabi by virtue of being a wholly owned entity and a vehicle of public policy,” said senior analyst Julien Haddad on Monday.

ADQ, previously known as Abu Dhabi Development Holding, was set up by the emirate’s government in 2018 to handle stakes in companies with domestic operations.

The entity owns a broad portfolio of businesses, including the companies that operate Abu Dhabi Ports, Abu Dhabi Airport, the Abu Dhabi Securities Exchange and major industrial assets such as Emirates Steel.

“ADQ’s very strong credit ratings are consistent with the Abu Dhabi government’s solid financial standing," said Mohamed Alsuwaidi, chief executive of ADQ. "The ratings are a reflection of ADQ’s robust portfolio and important role in the diversification of the Abu Dhabi economy.”

ADQ holds direct and indirect stakes in more than 90 companies both globally and nationally. A number of these have either entered into, or have proposed, merger deals over the past 18 months to help build national champions – in many cases bringing larger combined entities on to public markets.

These have included the combination of Abu Dhabi National Energy Company, Taqa, with Abu Dhabi National Power Corporation, National Marine Dredging Company's tie-up with National Petroleum Contracting Company, Agthia's takeover of dates company Al Foah and recently announced proposals to merge Emirates Steel with Arkan Building Materials and Abu Dhabi National Hotels with Abu Dhabi National Exhibition Centre.

Unlisted Abu Dhabi Ports also took over The Higher Corporation for Specialised Economic Zones, better known as Zones Corp, last year.

ADQ “consolidates some of Abu Dhabi’s national champions” and is one of the primary public vehicles to carry out the government’s vision to reduce the local economy’s reliance on oil revenue and create jobs for Emiratis, the rating agency said.

Its credit quality benefits from its large scale, strong liquidity and “investments in assets with a market leading position” in the emirate, the ratings agency said.

“Liquidity at the holding company level is bolstered by dividends received from ADQ’s operating subsidiaries and investments, with Taqa being the main dividend contributor to the group in 2020,” the rating agency said.

ADQ’s stable outlook is aligned to that of the Abu Dhabi government, given the “strong credit links between the two”, Moody’s said.

Fitch Ratings also assigned the same 'AA' rating and stable outlook to ADQ as it has for Abu Dhabi's government, stating that the entity's ownership is unlikely to change given "its strategic objectives are closely aligned with national economic objectives".

Support for the entity has been "very strong" since its inception, with the Abu Dhabi Executive Council passing several resolutions to transfer government-owned entities to ADQ and the emirate's Department of Finance also providing funds "for certain portfolio assets and initiatives". These have included direct subsidies, reimbursement of revenues for services provided to citizens and the funding on "strategically important capital projects" on behalf of the government.