Fitch Ratings forecasts stable revenue for Southern Gas Corridor (SGC) from gas transportation at approximately $1.5 billion per year in 2025–2028, Report informs referring to the agency.
"Capex on average at $0.2 billion a year over 2025-2028," reads the message.
"At August 31, 2025, SGC had $2.3 billion of cash and deposits and $1.5 billion of funds under the treasury agreement with SOCAR Capital. The $2 billion Eurobond matures in March 2026, and we expect SGC to repay it from available funds. Maturities in 2025-2028 include only moderate amortisation payments on its bank loans of around $0.12 billion a year. We expect SGC to generate positive pre-dividend free cash flow over 2025-2028.
SGC's debt includes a Eurobond of $2 billion and loans from development banks due 2032-2046 totalling $1.5 billion, including the European Bank for Reconstruction and Development, the Asian Infrastructure Investment Bank, the International Bank for Reconstruction and Development and the Asian Development Bank," Fitch noted.
"We forecast EBITDA from gas transportation to remain stable in absolute numbers but that its share in total EBITDA will gradually increase to around 80% in 2027 from around 60% in 2024. SGC's upstream segment is exposed to gradual volume decline amid natural depletion of the Shah Deniz field. It is also exposed to gas and oil prices as a significant share of contracted gas volumes have linkage to commodity prices. We forecast upstream EBITDA will gradually decline over 2025-2028, and the share of upstream will gradually decrease from around 40% in 2024. This is due to projected decline in volumes and the Fitch-forecast decrease in Brent and title transfer facility (TTF) prices."
Fitch forecasts Brent crude oil prices at $70 per barrel in 2025, $65 in 2026, and $60 in 2027–2028. TTF gas prices are expected to reach $12 per 1,000 cubic feet in 2025, $8 in 2026, and $7 in 2027–2028.
"SGC's market position is underpinned by Europe's gas source diversification efforts and political support for large projects, including TAP's exemption from certain provisions of the EU Gas Directive. SGC also benefits from access to growing market volume in Turkiye. TANAP and TAP have expandable capacity.
We forecast EBITDA net leverage at around 0.5x on average over 2025-2028 (0.3x in 2024), driven by continued strong cash flow generation and low capex. We forecast that from 2026, SGC will distribute most annually generated cash as dividends to SOCAR and the state. We focus our analysis on SGC's consolidated profile, which includes full consolidation of TANAP (implying dividends to minorities), proportionate consolidation of the stakes in Shah Deniz PSA and in South Caucasus Pipeline, and dividends from the share in TAP," reads the message.
Southern Gas Corridor CJSC is owned by Azerbaijan (49%) and the State Oil Company of Azerbaijan (51%).
The Southern Gas Corridor was built to export gas from the Caspian region to Europe. Azerbaijan began exporting gas through it on December 31, 2020. The main components of the Southern Gas Corridor are: Stage 2 of the Shah Deniz project, the expansion of the South Caucasus Pipeline from Baku to Georgia to the Turkish border, the construction of the Trans-Anatolian Natural Gas Pipeline (TANAP) from Türkiye's eastern to western border, and the Trans-Adriatic Pipeline (TAP), connecting Greece, Albania, and southern Italy.
Given the increasing demand for Azerbaijani gas, the Southern Gas Corridor is planned to be expanded by increasing the capacity of the TANAP and TAP pipelines for supplies to Europe.