TASHKENT, Uzbekistan, December 19. Moody's Investors Service forecasts that Uzkimyosanoat’s earnings will shrink because of the privatization program from 2023 through 2025, although this might be partly offset by the launch of new projects in 2025, Trend reports.
The agency believes that the company’s proceeds from asset sales, estimated at around $400 million from 2023 through 2025, will not be sufficient to cover its sizeable investment plan.
“Uzkimyosanoat continues to benefit from its unchanged mandate to represent the state's interests in the chemical sector. The company also remains responsible for the implementation of the industry development strategy, which aims to increase diversification into more value-added products and reduce imports in the non-fertilizer segment by establishing low-tonnage production in the three chemical clusters to be owned and operated by Uzkimyosanoat. The size and importance of this development program, with more than 40 approved projects costing over $10 billion, will further require Uzkimyosanoat’s direct involvement in investments,” the agency’s report says.
Moody's added that regardless of the scale, timing, and financing structure of this involvement, Uzkimyosanoat already plans substantial capital spending of around $1.2 billion in 2023–24, including the additional large modernization program for its existing facilities, which is expected to cost around $500 million.
“In addition, Moody's forecasts a drop in global fertilizer prices from their peak in 2022 and also expects some evolving cost pressure on Uzkimyosanoat’s domestic business under the gas and electricity price liberalization, starting October 2023. The combination of these factors will result in the UK having to fund its capital expenditures with new debt. Moreover, as the government does not plan to provide wide-scale direct financing or guarantees, as was the case in the past, and given the weak domestic banking system, the UK will heavily rely on expensive funding from international lenders,” the analysts explained.
Moody's considers Uzkimyosanoat’s financing options for its investment program to remain quite limited because the resulting heavy debt burden will increase leverage substantially, with Moody's adjusted debt/EBITDA potentially spiking ten times from 5.7 in 2021.
“Further exacerbated by its less mature corporate governance processes and procedures, the lack of clearly articulated financial metric guidance, and the low level of disclosure, this will likely impede the company's ability to execute its ambitious investment program within the planned time and budget in the absence of substantial state support,” Moody’s believes.