(apicorp) - aa2 stable arab petroleum investments corporation

SOVEREIGN AND SUPRANATIONAL

ISSUER IN-DEPTH9 August 2021

RATINGS

APICORPRating Outlook

Long-term Issuer Aa2 STA

Short-term Issuer P-1 --

TABLE OF CONTENTSOVERVIEW AND OUTLOOK 1Organizational structure and strategy 2CREDIT PROFILE 5Capital adequacy score: a2 5Liquidity and funding score: aa2 10Qualitative adjustments 14Strength of member support score:High 16ESG considerations 18Rating range 19Comparatives 20DATA AND REFERENCES 21

Analyst Contacts

Alexander Perjessy +971.4.237.9548VP-Senior [email protected]

Gerard Arabian +971.4.237.9547Associate [email protected]

Lucie Villa +33.1.5330.1042VP-Sr Credit [email protected]

Matt Robinson +44.20.7772.5635Associate Managing [email protected]

Marie Diron +44.20.7772.1968MD-Sovereign [email protected]

Arab Petroleum Investments Corporation(APICORP) - Aa2 stableAnnual credit analysis

OVERVIEW AND OUTLOOKThe credit profile of APICORP reflects its high capital adequacy, supported by a track recordof strong profitability, robust asset quality and low levels of nonperforming assets, whichbalance relatively high leverage. The corporation's credit profile is also supported by its verystrong liquidity, underpinned by ample availability of liquid resources to cover upcomingnet cash outflows, and a well-diversified funding structure. APICORP's callable capital,which more than covers entire debt, and a strong enforcement mechanism underpin thecorporation's high strength of member support.

APICORP's credit challenges include its high leverage compared to peers, although weexpect that moderate growth in the loan book and restrained expansion in the direct equityportfolio will keep its leverage from rising significantly in the medium term. Longer term, thekey challenge will be the corporation's exposure to carbon transition, which is also the keylonger-term risk for APICORP's members.

The stable outlook reflects our view that the risks due to the challenging operatingenvironment in a number of countries where APICORP operates, stemming mainly fromregional geopolitical tensions and high exposure to declines in oil demand and prices, arebalanced by the corporation’s strong corporate governance and risk management practices,reflected in resilience to these risks over the past decade, and a trend towards greaterdiversification of its portfolio.

A material improvement in APICORP's capital adequacy position, including lower leverage,would support a higher rating, provided that the corporation also continues to maintain itsrobust liquidity and strong member support.

Conversely, a downgrade would likely be prompted by a combination of (1) a significant andpersistent deterioration in asset quality, such due to an extended period of very low oil pricesor a large geopolitical shock, (2) possibly related, an emergence of funding pressures, and/or(3) signs that shareholders' willingness to support APICORP is weakening. Over time, a morerapid carbon transition than currently expected could put a downward pressure on the rating,given the corporation’s exposure to the oil and gas sector.

This credit analysis elaborates on APICORP’s credit profile in terms of capital adequacy,liquidity and funding and strength of member support, which are the three main analyticalfactors in Moody’s Supranational Rating Methodology.

This document has been prepared for the use of Ajay Jha and is protected by law. It may not be copied, transferred or disseminated unless authorizedunder a contract with Moody's or otherwise authorized in writing by Moody's.

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https://www.moodys.com/credit-ratings/Arab-Petroleum-Investments-Corp-APICORP-credit-rating-822112017

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MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL

Organizational structure and strategyAPICORP was established by OAPEC

APICORP was established as a multilateral development bank (MDB) on 23 November 1975 in accordance with an internationalagreement (“Establishing Agreement of APICORP”) signed and ratified by the 10 member states of the Organization of Arab PetroleumExporting Countries (OAPEC).

Exhibit 1 shows the distribution of fully paid-in capital, with the largest shareholders being the governments of Saudi Arabia (A1negative), the United Arab Emirates (Aa2 stable) and Kuwait (A1 stable). APICORP’s headquarters are located in Dammam, SaudiArabia, and it has a wholesale banking branch in Manama, Bahrain (B2 negative).

Exhibit 1

APICORP’s shareholders are concentrated in the MENA region(Subscribed capital, % total)

17%

17%

17%

15%

10%

10%

5%

3%

3%

3%

Saudi Arabia (A1)

Kuwait (A1)

UAE (Aa2)

Libya (NR)

Iraq (Caa1)

Qatar (Aa3)

Algeria (NR)

Bahrain (B2)

Egypt (B2)

Syria (NR)

AlgeriaLibya

Egypt

Kuwait

Saudi Arabia

Iraq

Syria

UAE

QatarBahrain

Source: APICORP, Moody's Investors Service

APICORP is independent in its administration and in the performance of its activities. Unlike many other MDBs, it carries out itsoperations on a commercial basis, in accordance with its statutes. APICORP allocates 10% of annual net income to its statutory reserveand has the option of distributing the remainder as dividends to its shareholders. There is no dividend policy in place and dividenddistribution is mainly driven by surplus liquidity considerations. The board decided to forego dividend distributions in six out of the past11 years to strengthen the corporation’s balance sheet.

The Establishing Agreement of APICORP explicitly grants the corporation privileges throughout OAPEC member countries. Theseprivileges include: (1) the pledge and undertaking to support APICORP, jointly and severally; (2) the granting of rights and privileges ofnationality within any member country of OAPEC; (3) support for APICORP’s personnel in entry and residency throughout OAPEC; (4)exemption from payment of duties and all public and financial costs within OAPEC; (5) protection of assets against appropriation; (6)immunity from political risks; and (7) exemption from currency controls, including from convertibility and transfer restrictions.

Membership in APICORP is explicitly limited to member countries of OAPEC, and any country that withdraws its membership fromOAPEC is obliged to withdraw from APICORP.

APICORP fulfills its mandate through lending and equity investment operations

APICORP’s mandate is to assist in financing energy-related projects and industries, and associated fields of activity of OAPEC members,in order to strengthen member states’ economic and financial potential. To achieve its purpose, APICORP makes direct equityinvestments in (12% of total assets as of year-end 2020) and extends debt financing to (syndicated and direct loans, 51% of assets)local, regional, and international entities in the energy and petrochemical sectors, as well as for trading activities of first-tier Arab oiland gas exporters and global traders with creditworthy importing countries.

APICORP may conduct investments or financing proposals located outside of the Arab region if it sees potential association with theinterest and development of the wider energy industry in the Arab region. The rest of the assets comprise cash and cash equivalents,

2 9 August 2021 Arab Petroleum Investments Corporation (APICORP) - Aa2 stable : Annual credit analysis


https://www.moodys.com/credit-ratings/Saudi-Arabia-Government-of-credit-rating-660260

https://www.moodys.com/credit-ratings/United-Arab-Emirates-Government-of-credit-rating-600018601

https://www.moodys.com/credit-ratings/Kuwait-Government-of-credit-rating-441815

https://www.moodys.com/credit-ratings/Bahrain-Government-of-credit-rating-600018600


bank deposits, marketable securities, and property and equipment. APICORP also provides advisory services related to energy-relatedfinance and project development, and publishes macroeconomic research with a focus on the energy sector.

APICORP’s development mandate and its multilateral shareholding structure are typical of most MDBs. It differs from many otherhighly rated MDBs in that only a small share of its lending book consists of direct loans to governments, although most of its lending isindirectly associated with governments of its member countries through direct lending to government-owned entities, and to projectswith government guarantees or sponsored by government-owned entities. We therefore consider APICORP’s business model to beslightly more vulnerable than those of most other MDBs, the assets of which are largely characterized by direct sovereign exposure.The high concentration of assets in the energy sector, in accordance with the corporation's mandate, also differentiates APICORP fromsome other MDBs.

In the context of heightened geopolitical risk in the Middle East and North Africa (MENA), the corporation’s strategy has been toreduce the average maturity of its loan portfolio and accelerate exits from successful long-term equity investment projects, while alsoincreasing its focus on advisory services and trade and commodity finance, mainly in the Gulf Cooperation Council (GCC) countries.APICORP has been targeting moderate loan growth and strengthening its well-established cofinancing relationships with other MDBsactive in the region, including the European Investment Bank (EIB, Aaa stable), International Finance Corporation (IFC, Aaa stable), theIslamic Development Bank (IsDB, Aaa stable), the European Bank for Reconstruction and Development (EBRD, Aaa stable), and theAfrican Development Bank (Aaa stable).

Following a period of rapid growth in equity investments, APICORP has now shifted to a more balanced approach, with equityinvestments declining as a share of development assets in recent years. Compared to its 2012 level of $411 million, equity investmentsmore than doubled in 2013 to $914 million, although most of this increase was the result of portfolio revaluation. Since 2016, grossequity investments have stabilized at around $1,000 million and slightly fell to $973 million in 2020 where they accounted for 14% ofdevelopment-related assets. This reflects APICORP’s strategy to maintain a measured approach towards its equity business.

The corporation has added to its personnel to handle its larger balance sheet, which increased to $7.9 billion in 2020 from $7.3 billion inthe previous year and $5.1 billion in 2012. This annual expansion of 7.4% reflects both strong growth in lending (+6.5% in gross terms)and a significant increase in securities (+28.3%).

APICORP continues to diversify its investments across regions and sectors, following a selective investment approach. In 2017, APICORPentered into a partnership with Goldman Sachs (A2 stable) to create a $500 million managed account investment vehicle. Thispartnership vehicle is aimed at acquiring private-equity investments in a diversified global portfolio of energy assets. In the first halfof 2020, APICORP acquired a 20% equity stake in a wind power project in Jordan (B1 stable). As of year-end 2020, APICORP’s largestequity holding was Saudi European Petrochemical Company (Ibn Zahr) – a polypropylene manufacturer which is majority-owned bySaudi Basic Industries Corporation (SABIC, A1 negative) – at a book value of $418 million (see Exhibit 2).



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https://www.moodys.com/credit-ratings/European-Bank-for-Reconstruction-Devlpmnt-credit-rating-19620

https://www.moodys.com/credit-ratings/African-Development-Bank-credit-rating-14050

https://www.moodys.com/credit-ratings/Goldman-Sachs-Group-Inc-The-credit-rating-453900

https://www.moodys.com/credit-ratings/Jordan-Government-of-credit-rating-600018522/summary

https://www.moodys.com/credit-ratings/Saudi-Basic-Industries-Corporation-credit-rating-820019212


Exhibit 2

APICORP’s top 10 direct equity investments, as of 31 December 2020

Name Domicile Value, $ million

Saudi European Petrochemical Company (IBN ZAHR) Saudi Arabia 418.3

Egyptian Methanex Methanol Company S.A.E. (Emethanex) Egypt 119.1

Yanbu National Petrochemical Company (YANSAB) Saudi Arabia 96.6

APICORP GS Fund Cayman Islands 84.2

Saudi Arabia's Industrialization & Energy Services Co (TAQA) Saudi Arabia 80.1

Shuqaiq Water and Electricity Company (SIWEC) Saudi Arabia 33.8

Al-Khorayef United Holding Company (AKUH) Kuwait 30.2

Misr Oil Processing Company (MOPCO) Egypt 26.0

Tafila Wind Farm Jordan 23.4

Saudi Aramco (ARAMCO) Saudi Arabia 21.7

Note: Of this list, only Yanbu National Petrochemical Company, Industrialization and Energy Services Company, Saudi Aramco and Misr Oil Processing Company are listed.Source: APICORP, Moody's Investors Service

Wholesale deposit operations position APICORP as a unique MDB

Unlike most MDBs, APICORP accepts wholesale deposits. The few other rated MDBs that take deposits – Corporacion Andinade Fomento (CAF, Aa3 stable), Central American Bank for Economic Integration (CABEI, Aa3 stable), Islamic Corporation for theDevelopment of Private Sector (A2 stable) and Fondo Latinoamericano de Reservas (FLAR, Aa2 stable) – take deposits primarily fromshareholders, and they do not use the deposits as a source of funding for their banking operations.

APICORP’s business model differs from other MDBs, while sharing some characteristics with commercial banks in that it uses wholesaledeposits to fund treasury operations for profit and liquidity-management purposes. Until the end of 2016, APICORP also usedwholesale deposits to fund a portion of its core investment operations. Furthermore, in 2006, APICORP opened a bank branch inBahrain, operating under a Conventional Wholesale Bank License granted by the Central Bank of Bahrain (CBB), with the purpose ofcomplementing the treasury and capital market activities of the corporation and providing banking facilities – predominantly letters-of-credit – to clients. The branch is governed by the regulations of the CBB, but like other offshore banks operating in Bahrain, it does nothave access to central bank liquidity facilities.

During 1998-2005, deposits from banks accounted for an average 65% of the corporation's funding sources, with term financingcomprising the remainder. However, since 2014, the corporation has been reducing the deposits on its balance sheet, and this processaccelerated in 2018-20. At the end of 2020, deposits accounted for only $138 million (or 2.5% of APICORP's total liabilities), downfrom $2.1 billion (or 54.4% of total liabilities) in 2013.



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https://www.moodys.com/credit-ratings/Fondo-Latinoamericano-de-Reservas-credit-rating-600063339


CREDIT PROFILEOur determination of a supranational’s rating is based on three rating factors: capital adequacy, liquidity and funding and strengthof member support. For Multilateral Development Banks, the first two factors combine to form the assessment of intrinsic financialstrength. Additional factors that can impact the intrinsic financial strength, including risks stemming from the operating environmentor the quality of management, are also considered. The strength of member support is then incorporated to yield a rating range. Formore information please see our Supranational Rating Methodology.

Capital adequacy score: a2

Scale aaa aa1 aa2 aa3 a1 a2 a3 baa1 baa2 baa3 ba1 ba2 ba3 b1 b2 b3 caa1 caa2 caa3 ca c

+ Assigned -

Sub-factor scores

Capital position

Development asset credit quality

Asset performance

a3

a

aa3

Capital adequacy assesses the solvency of an institution. The capital adequacy assessment considers the availability of capital to cover assets in light of their

inherent credit risks, the credit quality of the institution's development assetsand the risk that these assets could result in capital losses.

Note: In case the Adjusted and Assigned scores are the same, only the Assigned score will appear in the table above.

Factor 1: Capital adequacy

We assess APICORP's capital adequacy as “a2”, which reflects high leverage levels compared to peers, but also robust developmentasset credit quality and strong asset performance. APICORP's “a2” score for capital adequacy is in line with Corporacion Andina deFomento, Council of Europe Development Bank (CEB, Aa1 stable), and the European Investment Bank.

APICORP's capital position balances relatively high leverage and high profitability

We score APICORP’s capital position at “a3”, which reflects its high leverage compared with peers. However, the corporation’s healthyand consistent profitability has previously enabled it to increase capital buffers, and we expect it to support its capital position in thefuture. As such, our assessment includes a “+1” adjustment for impact of profit and loss on leverage.

APICORP’s leverage ratio – which compares development-related assets and treasury assets rated A3 and below to useable equityand is our anchor point for assessing the corporation's capital position – stood at 296% in 2020. It has fluctuated between 250% and300% since 2013 and exceeds many peers at the A-Aa rating level, including Caribbean Development Bank (CDB, Aa1 stable) at 138%and CABEI at 231% (2019 data). However, it is lower than that of Eurofima (Aa2 stable) at 713% and CEB at 622% (see Exhibit 4).

Exhibit 3

Leverage ratio is stable at around 300%($ million)

Exhibit 4

...but high compared with peers(Leverage ratio, 2020)

0

50

100

150

200

250

300

350

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Development-related assets Useable equity

Leverage ratio (rhs)


0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

Note: CABEI and ITFC ratios correspond to 2019 (latest data available)Source: Moody's Investors Service




https://www.moodys.com/credit-ratings/Council-of-Europe-Development-Bank-credit-rating-207477/summary

https://www.moodys.com/credit-ratings/Caribbean-Development-Bank-credit-rating-600008564/summary

https://www.moodys.com/credit-ratings/Eurofima-credit-rating-207465


APICORP’s relatively high leverage ratio is underpinned by the robust growth in development-related assets (DRAs) over the past fouryears. After two years of contraction in 2014-15, DRAs expanded 9% annually, on average, over 2016-20. However, this rapid growthwas matched by the sustained expansion of its equity base, which has resulted in a relatively stable leverage ratio over the past fouryears. As shown in Exhibit 5, paid-in capital expanded by 50% to reach $1.5 billion. Given the corporation’s strong profitability, therapid increase in reserves and net earnings has fueled growth in useable equity.

Over the coming years, APICORP aims to maintain leverage at current levels. While the corporation will continue to grow its DRAs witha focus on its loan portfolio, the continued accumulation of statutory reserves will provide additional capital buffers. The $500 millioncountercyclical support package announced in April 2020 (which aims to support member countries in times of crisis) did not have asignificant impact on the leverage ratio. The uptake has been moderate, while a number of projects in the region have slowed or beenput on hold, putting downward pressure on overall loan disbursement. Meanwhile, the capital increase approved in April 2020 did notgenerate an improvement in APICORP's leverage ratio over the coming years. While paid-in capital increased by 50% to $1.5 billioneffective April 2020, the funds will be transferred from retained earnings, with no impact on the overall amount of useable equity.

Despite having a development mandate, APICORP, unlike many other MDBs, operates on a commercial basis, and, at times, paysdividends to shareholders. We typically assess the profitability of an MDB in the context of the contribution that it makes to buildingor depleting the institution’s capital base. This analysis is particularly relevant in the case of APICORP, as the board decided to foregodividend distributions in six out of the past 11 years to strengthen the corporation’s balance sheet.

As shown in Exhibit 6, APICORP’s profitability, as measured by its return on average assets, exceeds that of most peers at 1.5% in 2020.APICORP recorded net profits of $115.1 million in 2020, which corresponds to a 3% increase compared with 2019 levels. It is worthnoting that profitability was lower than in 2018, when the corporation recorded net profits of $182.3 million, boosted by its exit froma successful long-term direct equity investment in the UAE-based National Petroleum Service (NPS), which netted $86.7 million ofrealized gains.

We expect profitability to remain strong in the coming years, underpinning our “+1” adjustment for impact of profit and loss onleverage. Our expectation is underpinned by the corporation's sound risk-management practices and its track record of navigatingturbulent times. Beyond the coronavirus crisis, the corporation expects equity investment exits to pick up pace, which should furtherboost profit and support its capital base.

Exhibit 5

Reserves and retained earnings still support its capital position($ million)

Exhibit 6

APICORP's robust profitability has bolstered its capital base(Return on average assets, %, 2020)

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Paid-in Capital Retained Earnings Reserves


0

0.5

1

1.5

2

2.5

Note: CABEI and FLAR ratios correspond to 2019 (latest data available)Source: Moody's Investors Service




Ongoing asset diversification supports asset quality

We assess APICORP’s development asset credit quality (DACQ) at “a”. APICORP’s weighted-average borrower rating, which functionsas our anchor point for the DACQ assessment, is robust at Ba1. While APICORP has increased its exposure to non-investment gradecountries, which accounted for more than 30% of the loan portfolio in 2020, especially Bahrain, Oman (Ba3 negative), Egypt (B2stable) and Azerbaijan (Ba2 positive), more than half of loans remain in sovereigns rated A3 or higher.

APICORP's lending to sovereigns and government-owned entities accounted for 88% of gross loans as of December 2020, unchangedfrom the previous year. However, most private-sector loans relate to government-sponsored projects. Moreover, Article 15 of thecorporation’s Establishing Agreement grants APICORP preferential access to foreign exchange in the event of a country’s foreign-exchange crisis. APICORP’s loans are also exempt from country risk provisioning when applicable, and its loans have never beenincluded in general country debt rescheduling. APICORP has only once been involved in a Paris Club rescheduling (Algeria in 1995) andit subsequently recovered 100% of its outstanding loan balance. Similarly, APICORP has never been subject to mandatory new moneyobligations under any country debt rescheduling. Examples of this include Paris Club rescheduling and debt-forgiveness of sovereignobligations to Iraq (Caa1 stable) in 2003: APICORP’s outstanding loans to government-related entities were not included in any of itsprovisions. All of these factors make APICORP’s lending exposure less risky than implied by the weighted-average borrower rating.

While APICORP is one of only few MDBs that have direct equity investments, this exposure has consistently fallen over the past severalyears, declining to 14.2% of DRAs in 2020 from a peak of 22.8% in 2015 (see Exhibit 7). Over the coming years, the share of equityinvestment is likely to decline further as the corporation plans to maintain a measured approach towards its equity business, and isconsidering further strategic exits from successful long-term investment projects.

APICORP’s largest equity investment is in Ibn Zahr, a Saudi Arabia-based petrochemicals conglomerate, has been a very profitableinvestment, paying on average an annual dividend of more than $40 million per year over the past five years and providing a steadystream of non-interest income. Excluding Ibn Zahr, which does not share many characteristics of other typically more risky equityinvestments, APICORP’s equity investment portfolio would be less than 10% of DRAs.

Exhibit 7

Share of equity investments is decliningExhibit 8

Loan portfolio is largely concentrated in the MENA region, butdiversification efforts are ongoing(Share of gross loans, %, 2020)

10

12

14

16

18

20

22

24

0%

5%

10%

15%

20%

25%

2015 2016 2017 2018 2019 2020

Equity Investments, % DRA Number of Investments (rhs)


Algeria2%

Azerbaijan3% Bahrain

12%

Egypt5%

Kuwait3%

Luxembourg1%

Oman7%

Qatar13%

Saudi Arabia33%

Singapore2%

UAE12%

Other7%


Given its mandate to finance energy-related projects mainly in OAPEC member states, APICORP’s asset portfolio is inevitablyconcentrated in the energy sector (46% of loans in 2020) and in the Middle East region (33% of loans in Saudi Arabia, 12% in Bahrain,13% in Qatar (Aa3 stable), as shown in Exhibit 8. However, this concentration is not atypical for regional MDBs and is consistent withAPICORP’s peers. Furthermore, single-name concentration is low at 6.1% of total DRA, with the top 10 largest exposures accounting foraround 26% of total DRA.

Nevertheless, APICORP is making progress in diversifying its asset portfolio across regions and sectors, especially through its equityinvestment (see Exhibit 9). With the acquisition of UK-based Ashtead Technology in 2016, the corporation increased its exposure



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to regions outside of the GCC. In 2017, APICORP entered into a partnership with Goldman Sachs for the creation of a $500 millionmanaged-account investment vehicle to acquire private-equity investments in a diversified and global portfolio of energy assets.APICORP is also increasingly involved in the renewable energy sector, through both its loan and equity portfolios.

Exhibit 9

Concentration risks are lower relative to peers amid efforts to diversify the lending portfolio(Herfindahl-Hirschman Index HHI)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Region HHI Country HHI Industry HHI

2016 2017 2018 2019 2020

Source: APICORP, Moody’s Investors Service

Asset performance is strong, reflecting low levels of NPLs

We score APICORP’s asset performance at “aa3”, reflecting the relatively low level of nonperforming assets (NPAs) and ourexpectations for them to stabilize at the current level. Nonperforming loans (NPLs) have declined since 2017, and equity impairment isnow the main source of NPAs.

Exhibit 10

NPAs stabilized in 2020 as devaluation in equity portfolio waslower than anticipated(%)

Exhibit 11

Asset performance is now favorable compared with peers(NPAs to DRA, %)

0

5

10

15

20

25

30

35

40

0

0.5

1

1.5

2

2.5

2012 2013 2014 2015 2016 2017 2018 2019 2020

Non-performing assets / DRA Provisions / Gross Loans

Reserves / Gross Loans (rhs)


0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

CDB (Aa1) CAF (Aa3) IIC (Aa1) APICORP(Aa2)

IDA (Aaa) GuarantCo(A1)

2018 2019 2020

Source: Moody's Investors Service

NPAs relative to DRAs, our key ratio for assessing asset performance, fell to 0.7% in 2020, down from 1.7% in 2019. NPLs increasedto $23.7 million in 2020 from $14.7 million in 2019, and accounted for only 0.6% of gross loans. The settlement of the long-standing(and fully provisioned) NPL to Iraq in January 2018, amounting to $51 million, has improved NPL levels over the past two years. Whilethe coronavirus shock will likely exert pressure on asset performance, we expect NPLs to remain broadly stable.

In contrast, equity investment was the main source of new NPAs in 2019 because of changes in the fair value of direct equityinvestments after the corporation undertook an independent review of its entire direct equity portfolio. Since 2018 and the adoption ofIFRS9 accounting standards, APICORP records allowances for expected credit losses against incurred losses previously. Changes in the




fair value of direct equity investments has been the main source of new NPAs in 2019 and in 2020. The corporation's equity investmentportfolio has, however, declined as a share of total DRAs to 14.2% in 2020 from 22.8% in 2015.

APICORP's “green” asset portfolio nearly doubled in 2020

Notwithstanding some portfolio concentration in the oil and gas sector, over the past five years APICORP significantly increased itsshare of financing provided to “green” and other sustainable development related projects. The corporation's “green” portfolio as ashare of total development-related assets increased to nearly 11% in May 2021 from 1.7% in 2016 (Exhibit 12). The bulk of these new“green” exposures, including loans, loan commitments and equity investments, were in renewable energy, water management andwaste management sectors (Exhibit 13).

During 2020 alone, APICORP's “green” assets increased to $723 million from $375 million. The portfolio includes a $125 millionShariah-compliant corporate facility to support ACWA Power's (Baa3 stable) investments in renewable projects, a $50 million revolvingconstruction facility to UAE-based Yellow Door Energy Limited to develop solar-PV plants, a $70.5 million financing to Shuaa Energyfor the fifth phase of development of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai, and a $50 million credit facilityfor SirajPower to expand its portfolio of distributed solar energy projects across the Middle East. APICORP's “green” investments alsoinclude funding for Tafila Wind Farm in Jordan.

Exhibit 12

APICORP has been growing its “green” portfolio…Development-related assets, $ million

Exhibit 13

…mainly supporting the renewable energy sectorComposition of “green” development-related assets, %

2.0 1.7

3.6 3.4

5.9

10.5 11.3

0.0

3.0

6.0

9.0

12.0

15.0

0

200

400

600

800

1,000

2015 2016 2017 2018 2019 2020 2021*

Equity investments CommitmentsOutstanding Loans Green assets/Total DRA (%, right)

Source: APICORP and Moody’s Investors Service

Renewable Energy80%

Water15%

Waste Management5%

Source: APICORP and Moody’s Investors Service



https://www.moodys.com/credit-ratings/ACWA-Power-Management-and-Investments-One-Ltd-credit-rating-825257416/summary


Liquidity and funding score: aa2


+ Assigned -

Sub-factor scores

Liquid resources

Quality of funding

aaa

aa

An entity’s liquidity is important in determining its ability to meet its financial obligations. We evaluate the extent to which liquid assets cover net cash flows

over the coming 18 months and the stability and diversification of the institution’s access to funding.


Factor 2: Liquidity and funding

We score APICORP's liquidity and funding as “aa2”, which reflects the high and improving quality of its funding structure, as wellas a robust level of liquid resources. Our assessment of APICORP's liquidity and funding is in line with that of Asian InfrastructureInvestment Bank (AIIB, Aaa stable), Inter-American Investment Corporation (IIC, Aa1 stable) and CABEI, among others.

High quality liquid assets compensate for relatively high refinancing needs

For the purpose of calculating our liquid resources ratio, we consider only highly liquid assets such as cash and short-term bankdeposits, as well as securities rated A2 or higher. This is because we believe only those would be available in a stress scenario at shortnotice and with minimal loss. For APICORP, these assets amounted to $2.4 billion at the end of 2020. These high quality liquid assetslargely comprise cash and deposits at banks with a term of under one-year (counterparty risk above Baa3) and treasury assets rated A2and above. Of APICORP’s treasury assets (including cash and cash equivalents), 48% was rated in Aa and Aaa categories, and 36% wasrated in the A category (see Exhibit 14).

APICORP is increasingly investing in treasury assets outside the MENA region. The corporation has diversified its treasury assets awayfrom the MENA region, with non-MENA treasury assets accounting for 44% of treasury assets at end-2020 compared to 39% in 2019and 14% in 2015.

Exhibit 14

High-quality liquid assets support APICORP's liquidity position(Treasury assets by ratings, including cash and equivalents, % total, 2020)

Exhibit 15

...but its refinancing needs in 2021 are large(Net cash outflows under stress scenario, $ million)

Aaa31%

Aa17%

A36%

Baa7%

Ba4%

B1% Caa

0%

Non-rated3%

Source: APICORP, Moody's Investors Service -1500

-1000

-500

0

500

1000

Q121 Q221 Q321 Q421 Q122 Q222

Loan inflows Other inflows

Loan disbursements Maturing market borrowings

Loan/lines of credit repayments Admin expenses

Other outflows


We also consider the size of the available liquid assets relative to net cash outflows over the coming 18 months in a stressed scenario,in which the MDB has no access to markets but continues its normal business operations. APICORP’s cash outflows are driven bya large maturing borrowing in the third quarter of 2021 (see Exhibit 15). Given the deposit-taking nature of APICORP, our net cashoutflow include the existing stock of deposits, given that this stock is now smaller than the maximum annual decline in deposits overthe past five years. We exclude deposits from Syrian and Libyan entities which cannot be withdrawn. As a result, APICORP’s availability



https://www.moodys.com/credit-ratings/Asian-Infrastructure-Investment-Bank-AIIB-credit-rating-825099745/summary

https://www.moodys.com/credit-ratings/Asian-Infrastructure-Investment-Bank-AIIB-credit-rating-825099745/summary

https://www.moodys.com/credit-ratings/Inter-American-Investment-Corporation-credit-rating-600058212/summary


of liquid resources ratio was 349% as of December 2020, a significant increase from the ratio of 140% recorded in December 2019.This corresponds to a score of “aaa” for liquid resources (see Exhibit 16).

We expect further treasury portfolio rebalancing towards securities rated A2 and higher, and diversification to broadly sustain theimprovements in the current liquid asset coverage of the upcoming net cash outflows over the next few years. The corporation istargeting to maintain this coverage, at a minimum, above 120%.

Exhibit 16

Liquidity resources are now broadly in line with peers(Liquid resources to net cash outflow over the next 18 months, %)

0%

50%

100%

150%

200%

250%

300%

350%

400%

EFSF (Aa1) BSTDB (A2) IIC (Aa1) ICD (A2) GIC (A2) CEB (Aa1) CABEI (Aa3) Eurofima (Aa2) CAF (Aa3) APICORP (Aa2)


Quality of funding has improved amid declining reliance on deposits and diversification of investor base

We score APICORP’s quality of funding at “aa”, reflecting the elimination of its maturity mismatches since 2017, significantly lowerreliance on deposits for funding, and the diversification of its investor base.

As part of its efforts to reduce reliance on short-term funding, APICORP has become a regular issuer of debt instruments, in multiplecurrencies and in multiple markets. In June 2015, APICORP established a $3 billion medium-term sukuk program, with the aim offurther lengthening its debt maturity. It was tapped for the first time in October 2015, with a $500 million five-year sukuk issuance (seeExhibit 17).

In 2016, the corporation issued its first Formosa bond on the Taiwanese market ($300 million with maturity of five years). In March2018, the institution accessed the offshore Chinese renminbi market with a CNY630 million ($100 million) three-year bond, becomingthe first supranational institution in the MENA region to access this market. APICORP also established a $3 billion Global MediumTerm Note (GMTN) program, which it tapped with the issuance of a $750 million five-year conventional 144(a) bond in September2018.

Funding conditions for APICORP remained favorable in the first half of 2020, despite the coronavirus crisis. As part of its $3 billionGlobal Medium-Term Note program, APICORP issued $750 million worth of dollar-denominated five-year bonds in June 2020 and$250 million through the reopening of existing bonds in October 2020. Most recently, APICORP issued a benchmark $750 milliondollar-denominated five-year bond in February 2021 which was retapped for another $250 million in March.

In line with the corporation's mandate to finance energy-related projects mainly in OPEC member states, the latest bond issuancessupport APICORP's liquidity position and continue to lengthen its funding profile.



https://www.moodys.com/research/Moodys-assigns-provisional-PAa3-to-APICORPs-Sukuk-Programme--PR_326710

https://www.moodys.com/research/Moodys-assigns-provisional-PAa3-rating-to-APICORPs-proposed-Global-Medium--PR_387730

https://www.moodys.com/research/Moodys-assigns-provisional-PAa3-rating-to-APICORPs-proposed-Global-Medium--PR_387730


Exhibit 17

Increasing presence in international debt markets(Issuance of debt instruments since 2016)

Year Description Tenor Currency Amount

2016 1st Formosa floating rate note 5 years USD 300 million

2017 2nd Formosa floating rate note 5 years USD 105 million

2017 Term deposit 3 years SAR 375 million

2017 2nd Islamic public Sukuk issuance 5 years USD 500 million

2018 1st China/Dim Sum bond issuance 3 years CHN 630 million

2018 Bilateral term loan 3 years USD 75 million

2018 Conventional 144 (a) public issuance conventional 5 years USD 750 million

2019 Term deposit 2 years SAR 375 million


2019 3rd Formosa floating rate note 5 years USD 300 million

2019 Syndicated term loan 5 years SAR 1.5 billion

2019 Bilateral term loan 5 years SAR 1.5 billion

2019 4th Formosa floating rate note 5 years USD 325 million


2020 Conventional Reg S Public Issuance 5 years USD 1.0 billion

2020 Private placement GBP bond 3 years GBP 100 million

2021 Conventional Reg S Public Issuance 5 years USD 1.0 billion


Meanwhile, APICORP has reduced its unusually heavy reliance on wholesale deposits. Between 2012 and 2020, short-term depositsfrom banks, corporates and entities directly owned or controlled by the member states accounted for 32% of APICORP’s totalliabilities, on average (see Exhibit 18). However, this ratio has fallen substantially to 2.5% in 2020, down from around 50% in 2012-13.Reflecting this reduced reliance on deposits, APICORP no longer uses its wholesale deposits to fund its loan and equity investmentoperations, and wholesale deposits are now lower than the corporation’s treasury assets.

Traditionally, APICORP's depositor base has been relatively stable. In 2020, the corporation further reduced its reliance on wholesaledeposits from $482.1 million (9.6% of total funding) in 2019 to $137.7 million (2.5% of total funding) last year. In addition, a portionof these entities deposits from corporates and shareholders also have a lending or direct equity investment client relationship withAPICORP, which makes them more stable than typical wholesale deposits. This view is also borne out of a history of regular depositrenewal.

Stable deposits, which we define as deposits with at least two consecutive years of renewal at the same or higher level, include directdeposits from shareholders (Syria and Libya) and amounted to $119.1 million at year-end 2020 (see Exhibit 19). This compares to $117.5million in 2019 and $113.9 million in 2018.




Exhibit 18

Deposits have declined steadily in recent years…Exhibit 19

...reflecting APICORP's strategy to reduce its reliance on short-term funding*($ million)

0%

10%

20%

30%

40%

50%

60%

2012 2013 2014 2015 2016 2017 2018 2019 2020

Deposits / Development-related assets Deposits / Liabilities


38%

47%

79%

52% 56% 64%

47%68% 95%

44%45%

65%

81%

65% 71%

65%

26%90%

0

500

1000

1500

2000

2500

2012 2013 2014 2015 2016 2017 2018 2019 2020

Stable Rest APICORP definition

* We define “stable” deposits as deposits with at least two consecutive years of renewal atthe same or higher level.Source: APICORP, Moody's Investors Service

Reflecting the reduced reliance on short-term funding, APICORP no longer has a short-term maturity mismatch. APICORP managesliquidity by grouping maturing assets and liabilities into four maturity buckets: up to three months; three months to one year; oneto five years; and over five years. The associated assets and liabilities are matched and the cumulative gap between the cash flowsas a percentage of liabilities is the relevant ratio that is managed by APICORP. As a result of the corporation’s efforts to reduce theshort-term maturity mismatch, the negative asset-liability gaps of up to one year became positive in 2017, at 6.5% of liabilities, andmaintained similar levels at 5.2% in 2020 (see Exhibit 20).

Exhibit 20

The maturity profile has improved significantly since 2017(Cumulative asset-liability maturity gaps, % of total liabilities)

-50

-40

-30

-20

-10

0

10

20

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Up to 3 months Up to 1 year Up to 5 years

Source: APICORP, Moody’s Investors Service




Qualitative adjustments

Adjustments

Operating environment

Quality of management

0

0

The capital adequacy and liquidity and funding factors represent the key drivers of our assessment of an institution’s intrinsic financial strength (IFS).

However, assessments of the operating environment and the quality of management are also important components of our analysis. To capture these

considerations, we may adjust the preliminary IFS outcome that results from the capital adequacy factor and the liquidity and funding factor. The result of this

analysis is the adjusted IFS outcome.

Qualitative adjustments to intrinsic financial strength

In our credit assessment of MDBs, we also take into account several other factors, such as an MDB's operating environment and thequality of its management, including risk management. However, we do not apply any adjustment for these factors in the case ofAPICORP.

APICORP has faced various challenges in its operating environment over the past 10 years, amid political unrest in a number ofmember countries, turmoil in the global energy markets, and the more recent coronavirus pandemic.

Given the sectoral concentration of APICORP's assets in energy-related projects, movements in oil prices pose a potential risk toAPICORP's credit profile. Volatility in global energy markets has not historically affected income from loans, but periods of low oilprices have weighed on dividend payments from direct equity investments and returns on fixed income securities issued by the oil-producing sovereigns.

That said, the correlation between the corporation’s net income and oil prices has significantly declined in recent years (see Exhibit 21),pointing to its ability to withstand volatility in the energy markets. The gradual diversification of APICORP's activities towards non-energy related sectors (especially through its equity investment) and its sound risk-management practices have limited its vulnerabilityto turbulence in the energy market.

Exhibit 21

Correlation between profitability and oil prices has declined(Net income [$ million] and Brent prices [$ per barrel])

0

20

40

60

80

100

120

140

160

180

200

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Net income Brent price, ave.


APICORP is also exposed to political risk, including geopolitical tensions in the Gulf. Recurring threats of maritime traffic disruption inthe Strait of Hormuz – because of tensions between Saudi Arabia and Iran – pose risks to APICORP's investment portfolio. That said,for those that could continue to get their products to the market, higher oil prices would likely generate an improvement in the debt-service capacity of APICORP's borrowers.

Over the past decade, APICORP's exposure to political unrest in a number of member countries and the subsequent deteriorationin their respective sovereign risk profiles have been contained. The corporation does not have any loan exposure to Syria, while its




loan portfolio in Libya represents less than 1% of total country exposure. The diplomatic dispute between Qatar and some of its GCCneighbors since mid-2017 did not have a material impact on APICORP's asset quality and overall operations.

Given APICORP’s track record of maintaining robust profitability despite geopolitical and economic tensions in the region, we do notmake any negative adjustment for operating environment.

APICORP’s risk management policies are prudent and robust, and the governance principles are of a high standard. The corporation hasa dedicated head of risk reporting directly to the CEO, with a direct access to the board audit and risk committee. The risk function isindependent from business lines and sets risk limits. APICORP also undertakes semi-annual stress tests for credit, liquidity and marketrisks.




Strength of member support score: High

Scale

+ -

Sub-factor scores

Ability to support

Willingness to support: Contractual

Willingness to support: Non-contractual

Very High High Medium Low

ba1

aaa

High

Shareholders' support for an institution is a function of their ability and willingness. Ability to support is reflected by the shareholders' credit quality. Willingness

to support takes into consideration (1) the members' contractual obligations that primarily manifest in the callable capital pledge, a form of emergency

support, and (2) other non-contractual manifestations of support to the institution's financial standing and mission. Strength of member support can increase

the preliminary rating range determined by combining factors 1 and 2 by as many as three scores.


Very Low

Assigned

Factor 3: Strength of member support

We assess APICORP’s strength of member support at “High”, reflecting a weighted-average shareholder rating of Ba1, high levels ofcallable capital and high willingness to support. Our “High” assessment reflects the positive impact of the large increase in callablecapital in April 2020.

Most shareholders are investment grade, which underpins our “ability to support” assessment

The weighted-average shareholder rating of APICORP was Ba1 as of end-2020, reflecting shareholders' robust ability to provideextraordinary support. Of APICORP’s 10 member countries, seven are rated by Moody’s: the United Arab Emirates, Kuwait, Qatar, SaudiArabia, Bahrain, Egypt and Iraq (see Exhibit 22). The capital base is held primarily by investment-grade countries (61%) – althoughnone are Aaa-rated – with the remainder held by non-investment-grade (16%) or nonrated countries (23%). As shown in Exhibit 23,APICORP’s weighted-average shareholder rating is broadly in line with that of peers.

Exhibit 22

More than 60% of shareholders are investment grade(Breakdown of subscribed capital by shareholder)

Exhibit 23

Ability to support is broadly in line with peers(Weighted-average shareholder rating, latest)

Bahrain (B2)3%

Egypt (B2)3%

Syria (NR)3%

Algeria (NR)5%

Iraq (Caa1)10%

Qatar (Aa3)10%

Libya (NR)15%Saudi Arabia (A1)

17%

Kuwait (A1)17%

UAE (Aa2)17%


Ba3

Ba2 Ba2 Ba2 Ba2

Ba1

Baa3

A2 A2

IIC (Aa1) BSTDB(A2)

CABEI(Aa3)

CDB(Aa1)

IsDB(Aaa)

APICORP(Aa2)

IIB (A3) EBRD(Aaa)

Eurofima(Aa2)


The capital increase in April 2020 substantially increased callable capital

APICORP's callable capital relative to total debt, which is our key measure for contractual strength of member support, grew to 166%in 2020 against 22.7% in the previous year (see Exhibit 24) after callable capital increased substantially in April 2020 from $1 billionto $8.5 billion. This ratio underpins our “very strong” assessment of shareholders' contractual willingness to support the corporation.However, the overlap between risks affecting APICORP and its hydrocarbon-reliant sovereign shareholders somewhat constrains thevalue of callable capital and our assessment.




In addition, APICORP’s shareholders have explicitly committed to support the institution on a “joint and several” basis. Article 6 of theArticles of Agreement states: “The Member States undertake, jointly and severally, to support the corporation, protect it and embraceits causes in every way that ensures the protection of its rights and interests internationally and otherwise and undertake to facilitateall the activities related to its objectives and to adopt all possible measures to that end.”

Although we do not regard the wording of this pledge as a full financial guarantee for creditors, it does indicate a stronger willingnessto support compared to the pro rata wording of support pledges of other MDBs. Typically, each member’s fulfillment of the callablecapital obligation is independent of the action of the other shareholders. While it is rare for an MDB to have shareholder support in thismore collective form, the language in the Articles of Agreement is open to interpretation. The joint support is not explicitly linked tocallable capital, although provision of callable capital would presumably be included in the more general expression of support.

Uniquely, APICORP's management can request callable capital to service debt, but also to expand development operations (whilemaintaining capital adequacy ratios), or to absorb losses from treasury or DRAs. These very broad callable capital guidelines differ fromthose of many other MDBs, which can typically only request callable capital to service debt. Once requested, APICORP’s callable capitalis expected to be paid in by members within two months.

Exhibit 24

APICORP had a modest level of callable capital compared withpeers...(Callable capital to total debt, %, 2020)

Exhibit 25

...but it increased dramatically in the first half 2020($ million)

0

20

40

60

80

100

120

140

160

180

CAF (Aa3) Eurofima(Aa2)

CABEI (Aa3) IIB (A3) BSTDB (A2) CDB (Aa1) APICORP(Aa2)


0

2000

4000

6000

8000

10000

12000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Paid-in Capital Callable Capital


APICORP's mandate is of strategic importance to its members

We assess shareholders’ willingness to support as “High”. The strategic importance of the energy sector to the OAPEC economies backsour view that APICORP benefits from a high priority of support.

In addition, APICORP’s track record of regular capital increases further supports this assessment. In May 2011, APICORP’s shareholdersagreed to change the capital structure by introducing callable capital of $750 million, in addition to paid-in capital of $750 million.Callable capital is an unconditional and full-faith obligation of each member country to provide additional capital within two monthswhen called.

In 2014, paid-in capital was increased to $1 billion, while the callable capital was reduced by the same amount to $500 million.However, in April 2016, the shareholders' $1 billion line of credit was replaced with additional callable capital of $500 million, whichincreased total callable capital to $1 billion. The introduction of callable capital demonstrates stronger support than the line of creditmade available by shareholders in 2008.

More recently, in April 2020, APICORP announced that its General Assembly ratified a very substantial capital increase, with immediateeffect for implementation. Paid-in capital was increased by $500 million, to $1.5 billion, through a transfer of retained earnings, whilecallable capital was increased to $8.5 billion from $1 billion.




ESG considerationsHow environmental, social and governance risks inform our credit analysis of APICORPMoody's takes account of the impact of environmental (E), social (S) and governance (G) factors when assessing supranational issuers’credit profile. In the case of APICORP, the materiality of ESG to the credit profile is as follows:

Environmental considerations are material to our assessment of APICORP’s credit profile. The portfolio concentration in the oil, gasand petrochemical sectors, reflecting the corporation’s mandate, combined with the economic and fiscal reliance of its shareholders onhydrocarbons, are sources of vulnerability to ongoing carbon transition. Nevertheless, we expect APICORP’s strong risk managementpractices and diversification efforts over time to strengthen its resilience to environmental risks.

Social considerations are not material to our assessment of APICORP’s credit profile.

Governance is a key factor in our assessment of APICORP’s credit profile. The corporation has a well-developed risk managementframework, as well as high governance standards.

All of these considerations are further discussed in the “Credit profile” section above. Our approach to ESG is explained in our cross-sector methodology General Principles for Assessing ESG Risks. Additional information about our rating approach is provided in ourSupranational Rating Methodology.






Rating rangeCombining the scores for individual factors provides an indicative rating range. While the information used to determine the grid mapping is mainly historical, our ratings incorporateexpectations around future metrics and risk developments that may differ from the ones implied by the rating range. Thus, the rating process is deliberative and not mechanical,meaning that it depends on peer comparisons and should leave room for exceptional risk factors to be taken into account that may result in an assigned rating outside the indicativerating range. For more information please see our Supranational Rating Methodology.

Exhibit 26

Supranational rating metrics: APICORP


+ Assigned -


+ Assigned -

Operating environment

Quality of management

Scale

+ -

Aa2

0

0

Aaa-Aa2

aa3

aa3

Assigned

Very High High Medium Low Very Low

Assigned rating:

Strength of member support

Scorecard-

indicated outcome range:

Liquidity and funding

Sub-Factors: Capital position, development asset credit quality, asset performance

Qualitative adjustments

Capital adequacy

Preliminary intrinsic

financial strength

Adjusted intrinsic

financial strength

Sub-factors: Liquid resources, quality of funding

Adjustment factors: Operating environment, quality of management

Sub-factors: Ability to support, willingness to support (contractual and non-contractual)

How strong are the institution's liquidity buffers?

How strong is the capital buffer?

What other elements can affect the intrinsic financial strength?

How strong is members' support of the institution?



This document has been prepared for the use of Ajay Jha and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwiseauthorized in writing by Moody's.



ComparativesThis section compares credit relevant information regarding APICORP with other supranational entities that we rate. It focuses on a comparison with supranationals within the samerating range and shows the relevant credit metrics and factor scores.

Exhibit 27

APICORP's key peers

Year APICORP Eurofima FLAR CAF IDB Invest CDB Aa Median

Rating/Outlook Aa2/STA Aa2/STA Aa2/STA Aa3/STA Aa1/STA Aa1/STA

Total assets (US$ million) 2020 7,893 20,872 6,509 46,846 6,424 2,121 7,201

Factor 1: Capital adequacy a2 baa1 a2 a2 a2 aa3

DRA / Usable equity[1] [2] [4] 2020 282.0 705.2 6.9 219.7 206.7 136.7 206.7

Development assets credit quality score (year-end) 2020 a aa b ba ba ba ba

Non-performing assets / DRA[1] 2020 0.7 0.0 0.0 0.3 0.4 0.1 0.4

Return on average assets[4] 2020 1.5 0.1 2.7 0.5 0.1 1.6 0.6

Net interest margin (X)[4] 2020 1.2 0.1 1.0 0.9 1.9 2.0 0.9

Factor 2: Liquidity and funding aa2 aa2 aa3 aa2 aa2 aa2

Quality of funding score (year-end) 2020 aa aa baa aa aa aa aa

Liquid assets / ST debt + CMLTD[3][4] 2020 451.0 128.8 0.0 295.6 248.1 399.7 308.0

Liquid assets / Total assets[4] 2020 35.4 -- 95.6 31.4 33.0 29.9 33.0

Preliminary intrinsic financial strength (F1+F2) aa3 a1 a1 aa3 aa3 aa2

Adjusted intrinsic financial strength aa3 a1 a1 aa3 aa3 aa3

Factor 3: Strength of member support H M L L M H

Weighted average shareholder rating (year-end) 2020 ba1 a2 b3 b2 ba3 ba2 baa3

Callable capital / Total debt 2020 165.8 12.8 -- 5.6 -- 125.7 145.8

Callable capital (CC) of Baa3-Aaa members/Total CC[4] 2020 61.0 95.9 -- 54.7 -- 42.4 91.6

Scorecard-indicated outcome range (F1+F2+F3) Aaa-Aa2 Aa2-A1 Aa3-A2 Aa2-A1 Aa1-Aa3 Aaa-Aa2

[1] Development related assets[2] Usable equity is total shareholder's equity and excludes callable capital[3] Short-term debt and currently-maturing long-term debt[4] Ratio not used in ScorecardSource: Moody’s Investors Service


This document has been prepared for the use of Ajay Jha and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwiseauthorized in writing by Moody's.


DATA AND REFERENCESRating history

Exhibit 28

APICORP[1]

Short-Term

Supranational Senior Subordinate Ratings Outlook Date

Arab Petroleum Investments Corp. (APICORP) Aa2 - P-1 STA 10/10/2019

Arab Petroleum Investments Corp. (APICORP) Aa3 - P-1 POS 10/18/2018

Arab Petroleum Investments Corp. (APICORP) Aa3 - P-1 STA 09/25/2012

Arab Petroleum Investments Corp. (APICORP) A1 - P-1 STA 10/27/2010

Arab Petroleum Investments Corp. (APICORP) (P)A1 - P-1 STA 09/30/2010

Arab Petroleum Investments Corp. (APICORP) A1 - P-1 STA 06/08/2010

Long-Term Ratings

Notes: [1] Table excludes rating affirmations. Please visit the issuer page for APICORP for the full rating history.Source: Moody's Investors Service



https://www.moodys.com/credit-ratings/Arab-Petroleum-Investments-Corp-APICORP-credit-rating-822112017/summary


Annual statistics

Exhibit 29

APICORP

Balance Sheet, USD Thousands 2014 2015 2016 2017 2018 2019 2020

Assets

Cash & Equivalents 982,912 995,068 838,575 525,124 809,342 655,470 432,305

Securities 1,181,092 1,068,980 1,203,518 1,631,520 1,428,689 1,840,223 2,361,015

Derivative Assets 0 0 0 0 0 0 0

Net Loans 2,690,803 2,510,060 2,951,598 2,965,028 3,492,929 3,671,548 3,900,966

Net Equity Investments 865,957 922,530 987,249 954,271 1,044,301 980,960 973,931

Other Assets 163,237 156,050 160,794 160,869 177,468 201,220 224,598

Total Assets 5,884,001 5,652,688 6,141,734 6,236,812 6,952,729 7,349,421 7,892,815

Liabilities

Borrowings 2,114,878 2,010,395 2,533,078 2,672,264 3,921,059 4,398,018 5,126,071

Derivative Liabilities 0 0 0 0 0 0 0

Other Liabilities 1,912,140 1,733,008 1,607,912 1,416,834 765,799 603,035 328,280

Total Liabilities 4,027,018 3,743,403 4,140,990 4,089,098 4,686,858 5,001,053 5,454,351

Equity

Subscribed Capital 1,500,000 1,500,000 2,000,000 2,000,000 2,000,000 2,000,000 10,000,000

Less: Callable Capital 500,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 8,500,000

Less: Other Adjustments 0 0 0 0 0 0 0

Equals: Paid-In Capital 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000

Retained Earnings (Accumulated Loss) 93,953 96,511 83,822 93,136 165,086 117,558 126,662

Accumulated Other Comprehensive Income (Loss) 0 0 0 0 0 0 0

Reserves 763,030 812,774 916,922 1,054,578 1,100,785 1,230,810 811,802

Other 0 0 0 0 0 0 0

Total Equity 1,856,983 1,909,285 2,000,744 2,147,714 2,265,871 2,348,368 2,438,464

Source: Moody’s Investors Service




Exhibit 30APICORP

Income Statement, USD Thousands 2014 2015 2016 2017 2018 2019 2020

Net Interest Income 40,114 44,907 53,814 66,181 111,040 108,466 83,072

Interest Income 106,701 106,662 125,758 159,472 245,629 279,714 197,711

Interest Expense 66,587 61,755 71,944 93,291 134,589 171,248 114,639

Net Non-Interest Income 102,692 100,359 75,701 74,787 116,021 51,353 79,659

Net Commissions/Fees Income 1,460 1,218 734 643 277 2,008 3,532

Income from Equity Investments 86,530 85,883 54,251 37,312 56,383 61,212 27,990

Other Income 14,702 13,258 20,716 36,832 59,361 -11,867 48,137

Other Operating Expenses 37,773 37,664 36,091 37,323 44,789 47,918 47,659

Administrative, General, Staff 37,773 37,664 36,091 37,323 44,789 47,918 47,659

Grants & Programs 0 0 0 0 0 0 0

Other Expenses 0 0 0 0 0 0 0

Pre-Provision Income 105,033 107,602 93,424 103,645 182,272 111,901 115,072

Loan Loss Provisions (Release) 0 0 0 0 0 0 0

Net Income (Loss) 105,033 107,602 93,424 103,645 182,272 111,901 115,072

Other Accounting Adjustments and Comprehensive Income -52,545 -55,209 38,137 43,334 -21,981 1,753 -24,432

Comprehensive Income (Loss) 52,488 52,393 131,561 146,979 160,291 113,654 90,640


Exhibit 31

APICORP

Financial Ratios 2014 2015 2016 2017 2018 2019 2020

Capital Adequacy, %

DRA / Usable Equity 244.5 235.7 260.4 255.3 253.1 270.1 282.0

Development Assets Credit Quality (Year-End) -- -- -- -- a a a

Non-Performing Assets / DRA 1.6 1.5 1.3 1.2 0.5 1.7 0.7

Return On Average Assets 1.8 1.9 1.6 1.7 2.8 1.6 1.5

Net Interest Margin 0.8 1.0 1.1 1.3 1.9 1.8 1.2

Liquidity, %

Quality of Funding Score (Year-End) -- -- -- -- aa aa aa

Liquid Assets / ST Debt + CMLTD 256.3 -- 365.7 1,408.9 174.7 386.5 451.0

Liquid Assets / Total Debt 102.3 102.7 80.6 80.7 57.1 56.7 54.5

Liquid Assets / Total Assets 36.8 36.5 33.2 34.6 32.2 34.0 35.4

Strength of Member Support, %

Weighted Average Shareholder Rating (Year-End) Ba1 Ba1 Ba1 Ba1 Ba1 Ba1 Ba1

Callable Capital / Gross Debt 23.6 24.9 39.5 37.4 25.5 22.7 165.8

Callable Capital (CC) of Baa3-Aaa Members/Total CC 64.0 64.0 61.0 61.0 61.0 61.0 61.0





Moody's related publications

» Credit Opinion: Arab Petroleum Investments Corporation – Aa2 stable : Regular update, 29 July 2021

» Rating Methodology: Multilateral Development Banks and Other Supranational Entities, 28 October 2020

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. Allresearch may not be available to all clients.

Related websites and information sources

» Sovereign and supranational risk group web page

» Sovereign and supranational rating list

» APICORP

MOODY’S has provided links or references to third party World Wide Websites or URLs (“Links or References”) solely for your convenience in locating related information and services.The websites reached through these Links or References have not necessarily been reviewed by MOODY’S, and are maintained by a third party over which MOODY’S exercises no control.Accordingly, MOODY’S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised onany third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services providedby any third party.

AuthorsAlexander PerjessyVice President - Senior Analyst

Gerard ArabianAssociate Analyst





https://www.moodys.com/researchandratings/market-segment/sovereign-supranational/-/005005/005005/-/-1/0/-/0/-/-/-/-1/-/-/-/en/global/pdf/-/rra

https://www.moodys.com/research/Sovereign-Supranational-Rating-List--PBC_186519

https://www.moodys.com/credit-ratings/Arab-Petroleum-Investments-Corp-APICORP-credit-rating-822112017/summary


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(apicorp) - aa2 stable arab petroleum investments corporation

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