Azerenerji JSC's ratings continue to be aligned with those of its sole shareholder, the Republic of Azerbaijan, reflecting the strong legal, operational and strategic ties between the company and the state. The rating alignment reflects state guarantees for the majority of Azerenerji's outstanding debt, the company's strategic importance to the Azerbaijani economy and strong operational links, including tariff and capex approval by the government, as well as a track record of direct tangible state support.
“Given Azerenerji's unsustainable standalone profile, we expect it to receive state guarantees for any new, currently unplanned, debt. State guarantees for Azerenerji's debt are included in the government's debt and the government has sufficient resource to meet its obligations to Azerenerji and its creditors”, the agency said.
Fitch assumes that the share of state-guaranteed debt will remain fairly stable over 2016-2018 and Fitch does not expect any significant changes to the legal links with the state in the foreseeable future, as there are no plans at present to privatise Azerenerji: “The state has also continued to provide equity injections, totalling around AZN970 million over 2009-2015, to partially fund its investment programme (around 47% of total capex over this period). We expect that investment projects will continue to be funded from the state budget or will be postponed. Additionally, following the decree signed at end-2015, the state will provide equity injections of USD172 million and EUR204 million to Azerenerji to assist the company in repaying its foreign currency loans over 2016-2025”.
The state will also assist Azerenerji's main customer, state-owned Azerisiq JSC, to pay overdue trade payables to Azerenerji so that the latter may reduce overdue trade payables to State Oil Company of the Azerbaijan Republic, another state-owned entity. The government also agreed to provide a AZN360 million low interest, long-term loan to Azerenerji so that it can pay its tax due.