Fitch agency affirms rating of 'Azerenerji' JSC - UPDATED

Baku. 7 December. REPORT.AZ/ Fitch experts believe, Azerenerji will receive state guarantees for any new, currently unplanned, debt. State guarantees for Azerenerji's debt are included in the government's debt and the government has sufficient resource to meet its obligations to Azerenerji and its creditors.

Report informs, Fitch assumes that the share of state-guaranteed debt will remain fairly stable over 2016-2018 and we do not expect any significant changes to the legal links with the state in the foreseeable future, as there are no plans at present to privatise Azerenerji. "The state has also continued to provide equity injections, totalling around AZN970m over 2009-2015, to partially fund its investment programme (around 47% of total capex over this period). We expect that investment projects will continue to be funded from the state budget or will be postponed", the agency writes.

"Additionally, following the decree signed at end-2015, the state will provide equity injections of USD172m and EUR204m to Azerenerji to assist the company in repaying its foreign currency loans over 2016-2025. The state will also assist Azerenerji's main customer, state-owned Azerisiq JSC, to pay overdue trade payables to Azerenerji so that the latter may reduce overdue trade payables to State Oil Company of the Azerbaijan Republic (SOCAR, BB+/Negative), another state-owned entity. The government also agreed to provide a AZN360m low interest, long-term loan to Azerenerji so that it can pay its tax due", Fitch Ratings says.

"Azerenerji remains exposed to foreign currency fluctuations, as over 70% of its total debt at end-2015 was denominated in foreign currencies, mainly in euros, US dollars and Japanese yen, in contrast to almost all local currency denominated revenue. At end-2015, Azerenerji's debt increased to AZN2.4bn from AZN1.5bn, mainly on the back of local currency weakening. Following the manat devaluation in 2015, the state approved the provision of an equity injection to Azerenerji to partially cover its scheduled foreign debt repayments, as the majority of debt is guaranteed by the state", the report informs.

Fitch views Azerenerji's liquidity as weak and conditional on continued tangible support from the government. At end-1H16, cash of about AZN11m was insufficient to cover short-term debt of around AZN432m. Liquidity risk is somewhat mitigated by the state guarantees on the company's outstanding debt. 

***10:07

Baku. 7 December. REPORT.AZ/ Fitch Ratings has affirmed Azerbaijan-based utilities company JSC Azerenerji's Long-term Issuer Default Rating (IDR) at 'BB+' and Short-term IDR at 'B'. The outlook is negative, Report informs citing the Fitch Ratings' report. 

The affirmation of Azerenerji's ratings reflect continued strong links with the Republic of Azerbaijan (BB+/Negative), reflecting the company's strong legal, strategic and operational ties with the state. 

The report says, at end-2015, about 91% of the company's outstanding debt excluding accrued interest was guaranteed by the state and another 8.5% was provided by the Ministry of Finance. The negative outlook mirrors that of the sovereign.