Standard & Poor's assigns "BB" rating to SOCAR
Azerbaijan, Baku, Oct. 20 / Trend , S.Aliyev /
Standard & Poor's Ratings Services said today that it had assigned its 'BB' long-term corporate credit rating to the 100% government-owned vertically integrated State Oil Company of Azerbaijan Republic (SOCAR). The outlook is positive.
SOCAR already owns ratings of rating agencies Moody's and Fitch.
The rating on SOCAR reflects our opinion that there is an "extremely high" likelihood of timely and sufficient extraordinary support from its key owner, the Azerbaijani government (BB+/Positive/B).
"In line with our methodology for rating government-related entities (GREs), we view SOCAR's role in Azerbaijan's economy as "critical", due to the company's central role in the country's most strategic sector, oil, and its position as the largest taxpayer and employer," the report reads.
SOCAR has a monopoly in refining and petrochemicals, and is a minority shareholder and the government's representative in Azerbaijan's largest internationally led upstream projects, Azeri-Chirag-Guneshli (ACG; 11.6461% ownership) and Shah-Deniz (10%).
Standard & Poor's assesses the company's stand-alone credit quality at 'bb'. SOCAR has a "fair" business risk profile and a "significant" financial risk profile.
This reflects potentially large investments, if projects to expand the country's oil production are approved, or if the company proceeds with other acquisitions. The company has been acquisitive, as demonstrated by its $2 billion purchase of a controlling stake in Turkish petrochemical plant Petkim.
Moreover, the government is considering rebuilding and modernizing the country's whole refining and petrochemical industry.
SOCAR enjoys considerable ongoing support from the government, and SOCAR's adjusted debt is manageable, leading to comfortable credit metrics.
"The positive outlook on SOCAR reflects the positive outlook on Azerbaijan and our expectation of possible improvement in SOCAR's stand-alone credit profile," the report reads.
"If we upgrade the sovereign, we will also upgrade SOCAR, in line with our methodology for GREs. Likewise, if we revise the outlook on the sovereign to stable, we will also likely revise the outlook on SOCAR to stable."
Additional upside to the rating could result if SOCAR's stand-alone performance improves, for example, if large investments are financed by the government and not with corporate debt.
Standard & Poor's thinks that ratings downside pressure is quite unlikely, but could materialize if the link with the state weakens.