Fitch Revises Georgian Water and Power's Outlook to Negative; Affirms at BB-

Fitch Ratings has revised the Outlook on Georgia- based Georgian Water and Power LLC's (GWP) Long-Term Foreign and Local-Currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at 'BB-'. A full list of rating actions is below.

The revision of the Outlook to Negative reflects lower than expected EBITDA and higher than expected investments during the last two years as well as the expected impact of the coronavirus pandemic and related economic crisis on the company's operations, including a drop in water supply volumes to legal entities and some deterioration in collection rates. As a result, we expect leverage to remain above our rating sensitivity during 2020, but to recover in 2021 on the back of the expected increase in water tariffs.

The rating is supported by GWP's natural monopoly position, solid profitability, improving regulatory environment, reducing water losses, good receivables collection rates, asset ownership and low sector risk. This is offset by increased leverage resulting in reduced financial flexibility, with refinancing needed during 2020, FX risk, worn-out water infrastructure, and a group structure with related-party transactions, albeit decreasing and on market terms.