Fitch: CIS Utilities Face Regulatory Changes, Currency Depreciation
OREANDA-NEWS. Fitch Ratings says in a presentation that its 2016 sector outlook for utilities in the CIS excluding Russia was moved to negative from stable due to weakening sector fundamentals.
We expect currency weakness and economic slowdown, combined with moderate electricity demand and regulatory framework changes, to weigh on the CIS power market in 2016.
The regulators in Kazakhstan and Azerbaijan are considering changes on the electricity markets, which should impact tariff determinations after 2015. This adds to uncertainty over companies' operations, and as a result, business and financial risks. We also believe that extensive capex programmes, which would mostly be debt-funded, might face funding challenges within the current market conditions.
Half of the ratings of the CIS ex-Russia power companies are on Negative Outlook, which is mostly driven by weakening legal links with the parent shareholder as well as weakening standalone profiles due to local currency depreciation.
We estimate most of the companies' standalone profiles and credit metrics have limited headroom to mitigate economic slowdown, primarily in Ukraine, while financial profiles have also weakened in Azerbaijan and Kazakhstan utilities.
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