Baku, Azerbaijan, June 10
Fitch Ratings has affirmed Azerenerji JSC's (national energy operator of Azerbaijan) Long-term Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook and Short-term foreign currency IDR at 'F3', the message of Fitch said.
Azerenerji's ratings continue to be aligned with those of its sole shareholder, the Republic of Azerbaijan, reflecting the strong legal, operational and strategic ties between the company and the state, according to the message.
"The recent 34 percent Azerbaijani manat devaluation weakens Azerenerji's standalone credit profile due to the currency mismatch between the company's debt and revenues and limited use of hedging to reduce exchange-rate risk exposure," said the message.
"At end-2014, almost 80 percent of the company's outstanding debt was denominated in foreign currencies, mainly in euros, dollars and Japanese yen versus almost all local-currency denominated revenue."
"We expect devaluation will increase Azerenerji's gross leverage to above 10x at end-2015, other things being equal," said the agency.
Fitch expects Azerenerji's cash flow from operations to decline to around 125 million manats on average over 2015-2018 from 230 million manats on average over 2011-2014.
The official exchange rate for June 10 is 1.0478 AZN / USD.
Free cash flow will likely remain negative over the rating horizon due to significant capital investment plans of 2.6 billion manats for 2015-2018 (excluding the distribution networks), according to the agency.
"We do not expect Azerenerji to pay dividends in the medium term," said the message.
Azerenerji JSC is the main producer of electricity in Azerbaijan.
The generation capacity of Azerbaijan's power supply system has increased by 30 percent over the last five years. Currently, its capacity is 7,105 megawatt. This allows generation of around 24 billion kilowatt hours of electricity and export 2.1 billion kilowatt hours of electricity annually.
Edited by CN