S&P revises outlook on Azerenergy
Standard & Poor's Ratings Services said that it had revised its outlook on Azerbaijan-based vertically integrated electricity utility Azerenergy to negative from stable.
At the same time, it affirmed the 'BBB-' long-term and 'A-3' short-term corporate credit ratings on Azerenergy.
The rating action mirrors that on the sovereign rating. It reflects the view of S&P that the Azerbaijan government's ability to provide support to Azerenergy in a financial stress scenario could weaken, and that a downgrade of Azerbaijan (BBB-/Negative/A-3) would likely result in a downgrade of Azerenergy.
The rating on Azerenergy reflects the assessment of an "almost certain" likelihood that Azerbaijan would provide timely and sufficient extraordinary support to the company in the event of financial distress, according to the criteria for government-related entities, and the assessment of Azerenergy's stand-alone credit profile (SACP) as 'b', said the message from S&P.
The assessment of an "almost certain" likelihood of state support is based on the view of Azerenergy's:
“The first is factor is the "Critical" role for the government, since it is the state's largest electric utility and the government arm for implementing strategies in the electricity sector. Furthermore, the state's economic development and social mandates ensure reliable and affordable electricity provision, in our view.”
The second factor is the "Integral" link with the government, given its 100% ownership and our expectation that this will not change in the next three years, according to the message.
S&P said it might revise the outlook to stable if we revised the outlook on the sovereign rating to stable.
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