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Fitch Ratings assigns Azerenerji ’BBB-’; Outlook Positive

04 May 2012 09:24 (UTC +04:00)

The Outlook on the Long-term IDR is Positive.

The ratings and Outlook are aligned with the Republic of Azerbaijan (’BBB-’/Positive/’F3’) reflecting strong legal, strategic and operational ties with the government of Azerbaijan.

Legal ties relate primarily to debt guarantees provided by the government, which covered 87.1% of Azerenerji’s total debt (excluding accrued interest) at YE11. Fitch assumes this ratio will remain relatively stable or increase over the next few years in order to support the alignment. Azerenerji is 100% owned by the State Committee on Property Issues, a government agency. Fitch does not expect any significant changes in the legal links in the foreseeable future due to lack of privatisation plans regarding Azerenerji.

Azerenerji’s virtual monopoly in Azerbaijan’s electricity generation market, considerable position in the distribution segment, and monopoly in the transmission segment demonstrate the company’s critical importance to Azerbaijan’s economy. Azerenerji’s top management is nominated directly by the President of Azerbaijan, which underlines the links with its owner. Fitch understands that Azerenerji’s operations are closely monitored by government agencies, including the review of the company’s budget and capex plans.