TASHKENT, Uzbekistan, January 6. The downgrade of Uzbekneftegaz's credit rating and the worsening of the outlook by Standard & Poor's (S&P Global Ratings) was a signal for the company to "correct the situation", Uzbekneftegaz head Bakhodirjon Sidikov told local media, Trend reports.
S&P downgraded Uzbekneftegaz from "BB-" to "B+" and the rating outlook from "stable" to "negative" in late November. The decision was due to the company's poor results, high debt burden, operation of Uzbekistan GTL gas processing plant not at full capacity, breach of obligations and reduced probability of state support.
At the same time, Fitch Ratings, which issued a commentary a week before S&P in November, left the rating and outlook unchanged, only downgrading the creditworthiness from 'b+' to 'b' due to weaker-than-expected profitability, projected slower decline in leverage, prolonged limited liquidity, and a recent breach of an interest coverage covenant for which the company received a non-compliance permit.
The head of Uzbekneftegaz said that S&P's downgrade was due to a lack of transparency by the company's divisions on the support measures provided by the state, which led to S&P's conclusion that the probability of state support was reduced and the fear that Uzbekneftegaz might not be able to repay its debts on its own.
Sidikov noted that international ratings are a barometer for Uzbekneftegaz and an assessment by international investors. According to him, the latest assessment from S&P was a signal for the company to "correct the situation".
He also stated that Uzbekneftegaz was selling gas for 340 soums ($0.028) when the agency's report came out, while the cost of gas production was 345 soums or $0.028. At the same time, each time during S&P visits, Uzbekistan informed that it planned to raise gas tariffs in the near future, but this did not happen.
Therefore, the rating agency gave such a conclusion, wondering how Uzbekneftegaz will fulfill its investment program and repay debts at such prices.
"Indeed Uzbekneftegaz has large debts. The main problem that complicates the financial situation of the company is the fact that more than 70 percent of loans have a floating rate of SOFR (money market interest rate in US dollars) and LIBOR (weighted average interest rate on loans on the London Interbank Foreign Exchange Market). The SOFR was previously at 0.2 percent and has now surpassed 5 percent. The rating agency has expressed concerns that interest payments are rising," he said.
The head of company emphasized that despite the high credit load, Uzbekneftegaz has never delayed payments on loans.
He said that the working group headed by the Deputy Minister of Economy and Finance visited London to meet with representatives of S&P and Fitch to answer their questions related to state support, profit reduction and Uzbekistan GTL plant.
The head of Uzbekneftegaz pointed out that the value of the company's Eurobonds fell to 79 percent after the publication of the report, following the meetings and dialog it rose to 85 percent.
According to him, all measures have been taken to improve communication with rating agencies and investors, and it is planned to resume dialog with S&P analysts in mid-January. The company intends to correct the rating within 2024.
Earlier, the Standard & Poor's (S&P Global Ratings) international rating agency has confirmed Uzbekistan's sovereign credit rating in foreign currency and national currency at the level of BB-/B with a stable outlook.