IBI-Rating has updated the credit ratings of JSC «ODESAOBLENERGO» and its bonds

IBI-Rating informs on affirming of the long-term credit ratings of JSC «ODESAOBLENERGO» at uaBBB- grade. The credit rating of the interest-bearing secured B series bonds (nominal volume of the issue amount UAH 500 mln, with redemption in 2022) is affirmed at uaBBB grade. The credit rating outlook was changed from «stable» to «evolving».

In 2018, JSC «ODESAOBLENERGO» carried out activities on the transmission and supply of electricity by local power grids to consumers in the Odesa oblast. In accordance with the Law of Ukraine «About the Electricity Market» from 01/01/2019, the JSC «ODESAOBLENERGO» has only the distribution function of electrical energy. The Company has the necessary licenses to carry out the above-mentioned activities. JSC «ODESAOBLENERGO» is a natural monopolist in the territory of the Odessa oblast, which ensures stable sales. By the results of 2018, electricity supply to the Company's grids and the volume of productive electricity supply to their own consumers increased by 2.3% and 2.2%, respectively. The total amount of consumer debt, compared with the beginning of the year, has been decreased. The largest debtors were the individuals and enterprises of the housing and utilities sector. JSC «ODESAOBLENERGO» has a significant amount of debt (including restructured) for the electricity supplied to the state-owned enterprise Energorynok. JSC «ODESAOBLENERGO» has a significant amount of debt (including restructured) for the electricity supplied to the SC «Energorynok».

Expected change of the majority shareholder of the Issuer - DTEK Group, which is the largest vertically integrated energy holding in Ukraine, plans to enter in the share capital. Thus, in January 2019, DTEK Neftogaz (Ukraine) and NGR B.V. (Netherlands) entered into contracts for the sale of shares. Dealings will be completed after obtaining the necessary permits from government agencies, including coordination of antitrust authorities.

Net income of JSC «ODESAOBLENERGO» in 2018 increased by 11.2%, as compared with the previous year, amounting to UAH 8,425.4 mln. There was an increase in all major components of net income, the largest one remaining the electricity supplies to legal entities (68% of the total structure). The activity of JSC «ODESAOBLENERGO» in 2018 was profitable - net profit amounted to UAH 0.9 mln.

The net debt of JSC «ODESAOBLENERGO» during 2018 decreased due to the repurchase of interest bonds and the revaluation of liabilities on foreign currency loans. The decrease in net debt was also contributed by the growth of highly liquid assets, which, while simultaneously increasing the estimated index EBITDA, contributed to a decrease in the Issuer's debt burden, the level of which is rated as acceptable. The sensitivity to foreign exchange risk remains, due to the availability of foreign currency loans.

The Issuer retains the need for significant investments in the renewal of fixed assets, given the need for continuous modernization. The amount of financing of the investment program for 2018 amounted to UAH 350.3 mln.

In order to conduct the analytical research the materials provided by JSC «ODESAOBLENERGO» have been used, including: annual financial statements for 2016-2018, background information on the enterprise activities, parameters of the B series bonds issue, other necessary internal information, expectations of the Rating agency IBI- Rating, as well as the information from the public sources, which the Rating agency considers credible.

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