JSC ENERGO-PRO Georgia's (EPG) 1H20 results are weak – Fitch Ratings said in a statement released today, adding that it has revised JSC ENERGO-PRO Georgia's (EPG) Outlook to Negative from Stable while affirming the utilities company's Long-Term Issuer Default Rating (IDR) at 'BB-' and simultaneously withdrawn the ratings for commercial reasons.

As the influential ratings organization explains, the weak results of EPG are due to a 10% yoy decrease of electricity distribution volumes and a 14% yoy decline in electricity supply volumes due to the liberalisation of high voltage (HV) customers since May 2019 and lower demand due to the impact of pandemic. “Its financial results were exacerbated by increased electricity purchase expenses due to low hydrology in Georgia and therefore limited availability of cheaper electricity. This contributed to the Negative Outlooks on the EPas and EPG's ratings” – The influential ratings organization stated.

Further the statement reads that historically, EPG has also provided loans to its shareholder, interest on which was capitalised rather than paid. EPG set off the amount refinanced by EPas with the respective amount of issued loans to the parent following the refinancing in 2018. EPG and EPas share common management and there is no significant ring-fence around EPG.

“We assess the relationship between EPG and EPas as strong, as the latter provides all funding, following the refinancing of the subsidiary's externaldebt with a shareholder loan in 2018” – Fitch Ratings explained in an official statement released today.

EPG is part of the ultimately privately-owned utilities group EPas, which also owns electricity companies in Bulgaria and Turkey.