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Fitch says after the finalisation of distribution assets disposal, Azerenerji will hold virtual monopoly position

10 June 2015 09:24 (UTC +04:00)

“So far, Azerenerji had a market share of around 55% in the domestic distribution segment in Azerbaijan, while Azerisiq was the sole electricity distributor in the Baku region. The assets disposal is aimed at separating the management and modernisation of the country's generation and transmission facilities to be continually run by Azerenerji from distribution facilities to be managed by Azerisiq. Fitch notes that after the finalisation of the distribution assets disposal, Azerenerji will remain the dominant player in the domestic energy market, holding a virtual monopoly position in generation and transmission. Fitch considers the effect on Azerenerji's standalone rating as currently uncertain, although it is neutral for the company's IDR, as it is aligned with the sovereign. Fitch notes that these distribution assets were largely amortised and require substantial funding (AZN1.9bn for 2015-2017) for modernisation, which would be deducted from Azerenerji's total capex programme. There is currently little visibility on the tariff structure post disposal and a smaller degree of vertical integration may increase business risk”, the Agency said.