S&P ups rating outlook on Georgian Oil and Gas Corporation

S&P ups rating outlook on Georgian Oil and Gas Corporation

Baku, Azerbaijan, Nov. 16
By Elena Kosolapova – Trend:
The International Rating Agency S&P Global Ratings had revised its outlook on Georgian Oil and Gas Corporation (GOGC) to stable from negative, the rating agency reported. S&P also affirmed 'B+/B' long- and short-term corporate credit ratings.

“The outlook revision reflects our expectation that higher EBITDA generation should help GOGC accommodate its capital expenditure (capex) projects without a material increase in leverage,” the rating agency said.

Thanks to currently favorable gas purchase prices and successful commissioning of the Gardabani thermal power plant in 2015, S&P expects GOGC's EBITDA to increase to over Georgian lari (GEL) 200 million (about $80 million) per year, compared with GEL125 million in 2015. Also, the rating agency understands that GOGC now plans to start large investments in its two major capex projects only in mid-2017 (expansion of the Gardabani thermal power plant [total cost estimated at US$180 million]) and 2018 (construction of an underground gas storage facility), after it obtains long-term financing for both projects.

“We understand that the new assets will now be commissioned and start generating cash flow no earlier than in 2019. Still, we think the increased operating cash flow should reduce the pressure on free operating cash flow (FOCF) in 2016-first half 2017 and support leverage below 4x during the heavy construction phase,” S&P said.
GOGC's business risk is constrained by the company's reliance on several large long-term contracts for gas supply from Russia and Azerbaijan. The impact on GOGC's earnings and cash flow generation would likely be material if the contract terms were unexpectedly amended during the contract period.

Constraining factors also include the company's lack of long-term strategic planning and a history of unexpected changes in the government's strategic decisions for GOGC.
S&P’s rating on GOGC includes a one-notch uplift, reflecting its expectation of a very high likelihood of extraordinary government support. GOGC has a mandate to ensure gas supply to the domestic market. The company is 100 percent government owned, so privatization risk is remote in the rating agency’s view.

The stable outlook reflects the view that GOGC's ratio of debt to EBITDA will be below 4x (on a gross basis, as adjusted by S&P Global Ratings), that the existing contract framework for gas purchase and sale will remain in place without any material changes, and that the company will not start new capex projects without long-term financing in place. It also assumes no major cost overruns or operational issues on the new projects. It also corresponds to the stable outlook on Georgia.

Rating upside could stem from a positive rating action on the sovereign, all else being equal. Rating upside based on GOGC's stand-alone performance is currently limited, because for an upgrade, S&P would need to revise GOGC's stand-alone credit profile to at least 'bb-', provided that the sovereign rating remained 'BB-' and the likelihood of support remained very high. This could happen if debt to EBITDA approaches 2x, but it is quite far from the base-case scenario.

The rating agency could downgrade GOGC if debt to EBITDA is sustainably above 4x, due to significantly lower profits or material capex overruns. This could happen, for example, in case of operational setbacks, or if the company's margins are squeezed by higher gas purchase prices.

Rating downside could also stem from a significant unfavorable change in the existing gas purchase and sale framework, or disposal of key assets, or government pressure to provide sizable support to other weaker GREs, or a material weakening of GOGC's role for and link with the government in case the government's strategy in the sector materially changes.
S&P could also lower the rating in case of a sovereign downgrade.

Armenia obligated under int'l law to provide mine maps to Azerbaijan - Matthew Bryza
Armenia obligated under int'l law to provide mine maps to Azerbaijan - Matthew Bryza
Another batch of munition left by Armenian soldiers found in Azerbaijan's Khojavand
Another batch of munition left by Armenian soldiers found in Azerbaijan's Khojavand
Azerbaijan commemorating 5th anniversary of April 2016 military success in Karabakh (UPDATE)
Azerbaijan commemorating 5th anniversary of April 2016 military success in Karabakh (UPDATE)
Loading Bars
Belarus expresses readiness to support Azerbaijan in restoration of liberated Karabakh (PHOTO)
Hydrocarbons to supply half of world’s energy needs by 2050
Iranian currency rates for April 14
All sanctions against Iran should be lifted unconditionally, Russia says
Turkmenistan losing popularity among Turkish job seekers
India's new coronavirus infections hit record of 184,372
Azerbaijan's Xalq Sigorta insurance company talks 2020 net profits
Oil maintains upward momentum but virus concerns cap gains
Britain to withdraw nearly all its troops from Afghanistan
Turkey's COVID-19 cases hit new peak at 59,000
Tehran to resume flights to London next month: Official
Cargo transportation via railways up in Kazakhstan
France to allow Georgian citizens find legal employment in country by end of 2021
Brazil reports 3,808 single-day deaths from COVID-19
Biden invited to address U.S. Congress on April 28
South Africa suspends J&J vaccine rollout
Azerbaijan to become regional hub for Industry 4.0 development - US IDC
U.S. administers 192.3 million doses of COVID-19 vaccines: CDC
France suspends all flights with Brazil due to virus variant
UK records another 2,472 coronavirus cases, 23 deaths
Boeing reports first quarter deliveries
Biden set to withdraw U.S. troops from Afghanistan by Sept. 11
Number of COVID-2019 cases across globe up by over 567,000 in past day — WHO
Iranian nuclear deal meeting in Vienna rescheduled to April 15
Kazakhstan expects positive dynamics in oil industry
Erdogan reveals stricter COVID-19 measures in Turkey during Ramadan
Iran's annual iron ore concentrate output nears 50mn tons
Deputy Finance Minister: Georgia ranks first in Europe with economic growth rate according to IMF
Southern Gas Corridor increases liquidity in European gas markets
Uzbekistan-India trade grows to record high in 2020
Azerbaijan plans to organize personal account system for auditors
China's 2M2021 import of Azerbaijani products surges in value
Exchange of all data necessary to conduct effective demining is required - OSCE MG
Baku to host international gymnastics competitions again
German gov't approves uniform nationwide COVID-19 response measures
Russia's daily COVID-19 cases record lowest in months
Iran to start 60% enrichment tonight: Nuclear spokesman
Israel to allow vaccinated tourists in starting late May
Biden confirms invitation to Putin to take part in climate summit
Presidents of Azerbaijan, Belarus hold unofficial meeting
IMF unveils forecast on Azerbaijan's oil export for 2021-2022
Azerbaijani FM, Romanian ambassador stress high level of development of bilateral political relations (PHOTO)
Special equipment of Belarus assembled in Azerbaijan may be exported to Turkey
Azerbaijan's Foreign Ministry responds to Armenia's statement on War Trophy Park
President of Belarus pays working visit to Azerbaijan (PHOTO)
Moscow, Tehran attach great importance to North-South Corridor – Russian FM
Azerbaijani president gives weighty answer to Armenia’s disinformation campaign - Official (VIDEO)
Belarus reveals plans for oil purchases from Azerbaijan
Kazakhstan’s FlyArystan launching direct flights to Georgia
Iran's Energy Exchange announces products to be on sale on April 14
International Bank of Azerbaijan opens tender to buy printed materials
Azerbaijan's Aghdam needs to be fully rebuilt - German historian (VIDEO)
Azerbaijan's PM meets with BP's regional president
Ukraine may take part in restoration of Azerbaijan's liberated lands
Azerbaijani Finance Ministry places short-term bonds on auction
Iron ore concentrate production by major Iranian companies increases
President Ilham Aliyev: Pakistan was among countries that openly supported Azerbaijan from first days of confrontation
Iran’s Bahar Azadi gold coin price again falling
Sudan due to send first delegation to Israel next week
Liabilities of Bank Melli Iran’s Baku branch increase
Armenia obligated under int'l law to provide mine maps to Azerbaijan - Matthew Bryza
Footage from Azerbaijani Jabrayil's Sadi village (VIDEO)
Azerbaijan, Ukraine discuss full resumption of mutual flights
Oil exports via Barents Sea in Lukoil system increased
Hydrometeorology in Azerbaijan needs young experts for technologies - ministry
Azerbaijan shares latest data on mine clearance work carried out on liberated lands
Co-op between Iran, Russia to be effective in activating nuclear deal – Rouhani
2021 demand for OPEC crude to be higher than in 2020
Assets of Iranian Bank Melli's branch in Azerbaijan increase
On Independence Day eve Israel's population over 9.3m
Iran still waiting for S.Korea to provide solution, release its blocked assets
Azerbaijan issues data on number of COVID-19 vaccinated citizens
Azerbaijan confirms 2,457 more COVID-19 cases, 2,002 recoveries
OPEC revises up forecasts for Azerbaijan’s 2021 liquids supply
Rosatom can take part in developing green energy in Azerbaijan - expert
Repairing of last well in Iran's Naft Shahr field launched
Iran in favor of strengthening relations with Russia – President Rouhani
Azerbaijan Railways builds co-op on transiting additional goods
IMF talks forecast of money supply growth in Azerbaijan for 2021-2022
European Hydrogen Backbone’s updated cost revealed
IMF predicts growth for Azerbaijan's oil, non-oil GDP
Cargo movements in Iran’s Qeshm port down
Azerbaijan expects tourism sector to recover by summer
Plan on budget revenues surpassed in Kazakhstan
Scotland to ease some COVID-19 restrictions early
Around 70% of European infrastructure to start transporting hydrogen
U.S. will base 500 additional troops in Germany
Russia documents 8,173 coronavirus cases in past day, lowest figure since September 28
Kazakhstan names value of payments of compulsory vehicle insurance
Iran's mobile phone imports increase
Azerbaijani president signs order on hosting European Football Championship matches in Baku
Kazakhstan drafts pricing rules for exported crude oil, gas condensate
Retail trade indicators decrease in Kazakhstan
Kazakh Gas Refinery opens tender to buy spares
Kazakhstan records decrease in oil output
Belarusian IT company keen to expand its activities in Azerbaijan's transport sector
Iran’s Jam Petrochemical Company announces its production plan
Uzbekistan building modern wastewater treatment facility at Uzbekneftegaz GTL plant
Kazakh Gas Refinery opens tender to buy engines
Russian, Azerbaijani military discuss Iskander-M missile debris in Karabakh region - Russian official
All news