Credit ratings of "Kirovogradoblenergo" PJSC and its bonds have been updated

IBI-Rating informs on affirming the long-term credit ratings of "Kirovogradoblenergo" PJSC and its series A, B interest-bearing bonds, at uaBBB grade with a change in outlook from "stable" to "negative."

VS Energy International NV (Netherlands) remains one of the shareholders of "Kirovogradoblenergo" PJSC, which is likely to be able to support the Issuer in the event such a need arises. The Issuer’s natural monopoly for the supply and transmission of electricity in the territory of Kirovograd oblast’ ensures the stability of sales. There remains a need for significant amounts of capital investments, given the need for continuous upgrading of fixed assets in accordance with the legislation of Ukraine.

According to the results for 6 months of 2015, the electricity transmission and supply through the grids of "Kirovogradoblenergo" PJSC decreased as a result of the economic downturn, but due to raising of the selling rates, the net income of the Issuer increased by 18.3%, up to UAH 647.5 million.

A significant devaluation of the hryvnia in the period under review led to the revaluation of the liabilities for the Issuer’s foreign currency loan, which increased the debt burden and has become one of the causes of unprofitability of "Kirovogradoblenergo" PJSC upon the results of 6 months of 2015. In this regard the credit rating outlook was changed to "negative", which indicates the possibility of a rating downgrade if the negative trends and current risks remain.

A positive impact on the credit rating may have, as follows: improved financial results with a simultaneous increase of performance indicators and reduced debt burden, liberalization of the energy market of Ukraine. A negative impact on the credit rating may have, as follows: default on debt liabilities, significant growth of the debt burden, substantial reduction of consumer payments with an increase in electricity rates, deterioration of the political and economic situation in the country.

In order to perform the analytical research the materials provided by "Kirovogradoblenergo" PJSC were used, including the annual financial statements for 2012-2014 and 6 months of 2015, background information on the activities of "Kirovogradoblenergo" PJSC, parameters of bond issues, other necessary internal information, expectations of the rating agency «IBI Rating», as well as the information from public sources, which the rating agency considers reliable.

Department of corporate ratings area
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