Baku, Azerbaijan, Mar. 17
By Azad Hasanli – Trend:
Fitch Ratings international ratings agency has affirmed Southern Gas Corridor CJSC’s (SGC) senior unsecured Eurobonds’ Long-Term foreign currency rating at 'BB+', reads the message of the agency Mar. 17.
The affirmation reflects Fitch’s unchanged view on SGC’s $2 billion Eurobonds maturing in 2026 fully guaranteed by Azerbaijan.
The reserves for the guarantee coverage have been taken into account in Azerbaijan government’s budget for 2017.
According to the Azerbaijani company’s management’s forecast, SGC’s net financial needs for operations and capital expenditures will be close to $5.4 billion in 2017-2019 taking into account proceeds from the operation of Shah Deniz Stage 1 and South Caucasus Pipeline.
“SGC’s funding stems from a combination of debt and equity originated from the Azerbaijani state, $2.5 billion bonds issued in favor of State Oil Fund of Azerbaijan at below market rates (LIBOR + 1 percent) and regular capital injections, which totaled $2.4 billion as of end-February 2017,” reads the message. “In addition, SGC placed initial guaranteed bonds of $1 billion in March 2016.”
In Fitch’s view, projects under SGC’s development carry strategic importance for Azerbaijan’s long-term macroeconomic stability as it is highly dependent on hydrocarbons, which accounted for 61 percent of current account receipts in 2016.
“The strategic importance of SGC is further strengthened by the cross-border nature of its projects, involved intra-governmental commitments and political support from transit states, the EU and consumers,” Fitch said in its message. “Most of the gas is already contracted up to 2045 by buyers from the EU and Turkey.”
Southern Gas Corridor CJSC is a company which represents Azerbaijan in the Southern Gas Corridor project.
The Southern Gas Corridor is one of the priority energy projects for the EU. It envisages the transportation of gas from the Caspian region to the European countries through Georgia and Turkey.
At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.
As part of the Stage 2 of the Shah Deniz development, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans Anatolian Natural Gas Pipeline and Trans Adriatic Pipeline.