“We think Georgian Oil and Gas Corporation is the strongest credit in Georgia” indicates J.P. Morgan after visiting Georgia for credit research update

11 June, 2019
With five Georgian issuers in the Eurobond market (and potentially more coming) J.P. Morgan organized an investor trip to Georgia in May and met with government officials, corporates and banks to discuss performance of Georgian bond-issuers and their further prospects.

On 24 May J.P. Morgan issued “CEEMEA Credit Research” a short summary covering macro economic situation in Georgia and credit research of Georgian bond-issuers.

According to J.P. Morgan Georgian Oil and Gas Corporation has the strongest credit in Georgia among bond-issuers due to several factors: growing contribution from FX linked earnings and guaranteed IRR-linked contracts of the power segment which results in better growth in future cash flow generation.

Commissioning of the second power plant Gardabani 2 which is expected to commence by the end of 2019 should also provide additional cash inflows and provide more stable future cash flows. J.P. Morgan estimates that power plants’ contribution to the EBITDA of Georgian Oil and Gas Corporation by 2020 will increase up to 75% after the commissioning of Gardabani 2.

Large investments of Georgian Oil and Gas Corporation in on-going project of Gardabani 2 and starting project of underground gas storage facility will lead to fluctuation of net leverage which is expected to be stabilized by the end of 2020.

Georgian Oil and Gas Corporation’s strategic importance as Georgia’s largest gas supplier and full state ownership are also supportive factors for investors and bond-holders.