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Fitch withdraws the ratings of EPG ‘for commercial reasons’

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Elene Kvanchilashvili
08.12.20 14:00
551
Fitch Ratings 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from Stable while affirming the utilities company's Long-Term Issuer Default Rating (IDR) at 'BB-' and simultaneously withdrawn the ratings for commercial reasons – Fitch Ratings issued a statement today.

According to Fitch, the revision of Outlook mirrors a similar rating action on EPG's sole shareholder, ENERGO-PRO a.s. (EPas). EPG's ratings are aligned with those of EPas, reflecting strong ties between the two, including direct funding from the parent. Georgia is one of three key operating countries within the group.

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

Fitch Ratings calls EPG’s 1H20 results ‘weak’. The main reason for that is 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.