Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Abu Dhabi water and power projects, including independent water and power producers, benefit from strong structural protections that support their credit resilience even under potential disruption scenarios, S&P Global Ratings said in a report.
The four projects rated by S&P Global — Ruwais Power Co., Emirates Sembcorp Water & Power Co., Sweihan PV Power Co. and Dhafra PV2 Energy Co — remain operationally stable and continue to demonstrate strong credit resilience, with no reported physical damage or disruption to generation or availability, the report said.
S&P Global expects some disruptions to persist for months but ruled out any material impact on the rated projects’ credit quality. “This is supported by their availability-based or take-or-pay revenue structures and robust contractual frameworks,” the ratings agency said.
All four projects benefit from long-term offtake agreements with Emirates Water and Electricity Co. (EWEC), which provide strong revenue visibility.
The report highlighted that Ruwais Power and Emirates Sembcorp derive most of their revenue from availability-based capacity payments under long-term power and water purchase agreements, which are payable irrespective of dispatch. These payments form the primary source of cash flow for debt servicing, with additional output-based payments covering variable operating costs.
Meanwhile, Sweihan PV and Dhafra PV2 operate under long-term power purchase agreements featuring take-or-pay obligations, requiring EWEC to purchase all available electricity at a fixed tariff. This ensures stable and predictable cash flows for the projects.
Across all four projects, the contractual framework provides strong protection against geopolitical risks, including war or armed conflict. In the event of such disruptions, project companies may be relieved of their operational obligations, while the offtaker remains obligated to continue making payments, including deemed payments where applicable.
These deemed payments — whether for available capacity in water and power projects or electricity generation in solar projects — represent the main source of cash flow for debt servicing.
The report also noted that as long as payments continue, project companies are not entitled to terminate their offtake agreements, reinforcing revenue continuity.
In the event of prolonged disruption leading to termination, EWEC would be required to compensate the project companies through termination payments covering outstanding debt and associated costs.
These obligations are backed by an unconditional and irrevocable guarantee from the Government of Abu Dhabi, covering EWEC’s payment commitments upon termination, further strengthening creditor protection.
S&P said these contractual features collectively provide strong protection for creditors and ensure that the projects’ ability to service debt is unlikely to be compromised, even in the event of geopolitical disruptions.
In addition to contractual safeguards, the projects benefit from operational resilience, with all facilities continuing to operate normally.
Enhanced monitoring and security protocols have been implemented, while onsite storage of critical spare parts and inventory helps mitigate potential supply chain disruptions.
