S&P rates Azerenerji 'BBB-', outlook stable
MOSCOW. Feb 14 (Interfax) - Standard & Poor's Ratings Services has assigned its 'BBB-' long-term and 'A-3' short-term corporate credit ratings to Azerbaijan-based electric utility Azerenerji JSC. The outlook is stable, the agency said in a press release.
"We have equalized the ratings on Azerenerji, a vertically integrated electric utility, with those on its 100% owner, the (BBB-/Stable/A-3) as we believe there is an "almost certain" likelihood of extraordinary government support in the event of financial distress according to our criteria for government-related entities. We assess the company's stand-alone credit profile at 'b', based on our view of its "fair" business risk profile and "highly leveraged" financial risk profile," S&P said.
"The Azerbaijani government's strong track record of financial support also underlines its commitment to Azerererji, in our view. This includes equity injections, debt guarantees on more than 90% of Azerenerji's debt as of year-end 2012 excluding accrued interest and leasing, asset transfers, low-interest-rate loans, and financial aid provisions. Although Azerenerji is subject to various taxes, the government has a history of approving tax payment delays for the company. In addition, Azerenerji's payables to the sole fuel provider, the state-owned (SOCAR), of about $2.0 billion were written off with the government's consent in 2010. In the same year, Azerenerji's receivables of a similar amount from other state companies were also written off.
Our base-case scenario indicates that Azerenerji will remain highly leveraged over the next two years, with a debt-to-EBITDA ratio of 5.0x-6.0x. We assume that, to finance its planned investment program totaling Azerbaijan manat (AZN) 2,250 million (about $2.9 billion) in 2013-2015, the company will receive about AZN2,130 million from the state budget as direct financing and equity injections.
The stable outlook reflects that on the sovereign rating and our expectation that we will continue to equalize the ratings on Azerenerji with those on Azerbaijan, owing to the "almost certain" likelihood of extraordinary government support. We believe that Azerenerji's role for the government will remain critical and that its links with the government will not weaken. A rating action on Azerbaijan would result in an equivalent action on Azerenerji," S&P said.
