Fitch Ratings has assigned Georgia-based electricity distribution company JSC ENERGO-PRO Georgia (EPG) an Expected Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘BB(EXP)’ with Stable Outlook.
The ratings are aligned with those of its sole shareholder, ENERGO-PRO, reflecting strong ties between the two, as the parent provided guarantees for the majority of EPG’s loans at end-2016 and will provide direct funding in future.
EPG is one of the key operating subsidiaries within the group, which was responsible for about 40% of ENERGO-PRO’s EBITDA in 2016 (before the spin-off of generation business).
The rating also reflects the standalone profile of the company, its natural monopoly position in electricity distribution and supply, with regulated asset-based tariffs set by the independent regulator in Georgia, and the relatively short track record of regulation, its small size compared to rated CIS utilities, volatile EBITDA and FX exposure. KEY RATING DRIVERS Distribution Focus EPG is a distribution company, formed after the restructuring performed in December 2016, to reflect the legal need to unbundle generation and distribution businesses into separate entities.
That resulted in the spin-off of the generation business to a new legal entity – JSC ENERGO-PRO Georgia Generation – and the transfer of all the hydro generation assets and 100% of shares of one of its subsidiaries, JSC Zahesi, to the newly created entity. As a result EPG’s rating only reflects the distribution business, which includes electricity supply as a pass-through item.
The company plans to unbundle the network and supply business, as will be required by regulations. Ratings Aligned with Parent The company is a part of a larger, ultimately privately owned, utilities group ENERGO-PRO, which also owns electricity companies in Bulgaria and Turkey.