Fitch Ratings has assigned Georgian Water and Power LLC’s (GWP) Long-term foreign and local currency Issuer Default Ratings (IDRs) of ‘BB-‘ for the second time. The Outlook is Stable.
The rating reflects trust in the company, its financial sustainability, and solid management team. GWP is the first non-financial, private Georgian company to be assigned the same rating as the sovereign, the highest that can be granted to a company in Georgia. This development places significant responsibility on the company, as GWP is the first utility company in Georgia to reach such success.
The ‘BB-‘ ratings reflect the company’s natural monopoly position in Tblisi’s water supply and sanitation sector. The ratings are supported by low sector risk, solid profitability, low leverage and good receivables collection rates. These positive attributes are offset by regulatory uncertainty and lack of tariff increases, heavily worn-out water infrastructure causing around 50% water losses and a risk of related-party transactions.
Most of GWP’s debt is secured on the shares of its parent, GGU, which affords creditors some control in a potential insolvency. The local bonds issued in 2015 and 2016 are unsecured, and therefore, have less creditor protection than the rest of the debt. We do not notch unsecured debt ratings down from the IDR as the amount of priority debt does not exceed Fitch’s threshold of 2.0x EBITDA. Should the amount of prior ranking debt exceed 2.0x EBITDA, we could apply downward notching to senior unsecured ratings.