Fitch affirms Uzbekneftegaz at 'BB-'/Stable

Fitch Ratings has affirmed Uzbekneftegaz's (UNG's) Long-Term Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook.

UNG's rating is equalised with that of its parent Uzbekistan (BB-/Stable). UNG is a fully state-owned integrated natural gas and liquid hydrocarbons producer with strong links to the government.

The rating agency also revised down UNG's Standalone Credit Profile (SCP) to 'b' from 'b+' in view of the company's weaker-than-expected profitability, projected slower deleveraging, consistently tight liquidity and recent interest coverage covenant breach for which the company obtained a waiver.

“We expect UNG's leverage to improve from 2025 as its gas-to-liquids (GTL) plant is now operational and should start to more significantly contribute to UNG's earnings from 2024 but it remains subject to operational risks. The 'b' SCP also reflects UNG's medium-scale production, integration into downstream activities, low-cost position and limitations of the general operating environment in Uzbekistan,” Fitch said.

UNG's rating equalisation reflects strong ties with the government under Fitch's Government-Related Entities (GRE) Rating Criteria. “We view the status, ownership and control factor as 'Strong' as the state is UNG's sole ordinary shareholder, although it has been considering selling a minority stake in UNG to outside investors,” Fitch noted.

Uzbekistan’s President Shavkat Mirziyoyev on November 22 visited the main office of Uzbekneftegaz to check the readiness of Uzbek power systems for winter. At a meeting with the leadership of the energy sector, it was noted that $1.2bn had been allocated for system improvement and increased readiness since the beginning of the year.

As part of the power grid modernisation programme, 100 substations, 11,500 transformers and 34,000 kilometres of power transmission lines have been updated.