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S&P improves rating of Azerbaijan's SOCAR

Business Materials 29 January 2021 15:50
S&P improves rating of Azerbaijan's SOCAR

BAKU, Azerbaijan, Jan.29

By Fidan Babayeva – Trend:

The S&P Global Ratings international rating agency has reviewed the rating of the State Oil Company of Azerbaijan (SOCAR) from ‘negative’ to ‘stable’ and confirmed the credit rating of SOCAR at ‘BB-‘, Trend reports citing a report of the S&P Global Ratings.

The agency's analysts have also revised the industrial risk assessment for the oil and gas exploration and production sector, to which SOCAR is significantly exposed, from ‘medium’ to ‘moderately high’ due to the increased environmental risks associated with greenhouse gas emissions, with yet unestablished policies and standards regarding such emissions and the increase the role of renewable energy sources in the structure of energy carriers, supported by a low level of costs.

“S&P still considers the SOCAR to be one of the government's main assets in the oil and gas industry, which is a key oil and gas industry for the country's economy. The company is wholly owned by the government, which is actively involved in defining the company's strategy and decision-making, and has repeatedly provided it with significant capital injections and leveraged funds to finance capital expenditures. Only about 10 percent of SOCAR's debt is guaranteed by the government,” said the report.

According to the agency, SOCAR is quite independent in terms of operational management, has a complex structure that is difficult to control.

“At this stage, it remains unclear to what extent the establishment of the Azerbaijan Investment Holding in August 2020 for the purpose of managing government-related organizations will influence SOCAR, since the list of assets to be transferred to the holding and its role hasn’t yet been determined.

Earlier, in its basic version, the S&P Global Ratings noted that the liquidity of the SOCAR will remain manageable, and its internal operations and exports will continue without interruption. The government's firm readiness and ability to provide emergency and ongoing support to SOCAR were noted.

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