Fitch: SGC requires cash to be fully covered by project proceeds

By Azernews

By Ayya Lmahamad

The Southern Gas Corridor's (SGC) total cash needs in 2022 will be fully covered by project proceeds, the Fitch rating agency reported on February 7.

"As all of its projects are already commissioned, SGC's total needs for cash in 2022 will be fully covered by proceeds from the Shah Deniz, South Caucasus Pipeline, Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP) projects, along with accumulated cash, according to management's forecast," the agency said.

The agency noted that the SGC is funded by the state through a combination of $6.5 billion in debt and $2.4 billion in equity injections.

"SGC did not borrow any new debt in 2021, while almost 70 percent of its debt stock as of end-2021 comprised bonds issued in favour of the State Oil Fund of Azerbaijan Republic (SOFAZ) and Eurobonds, followed by international financial institutions (IFI)/IFI-backed loans (30 percent)," the report added.

At the same time, Fitch Ratings has confirmed Southern Gas Corridor CJSC's senior unsecured Eurobond's long-term foreign-currency rating of 'BB+'.

"The rating reflects the unconditional, unsubordinated and irrevocable guarantee of full and timely repayment provided to SGC's noteholders by the state," the report reads.

The Southern Gas Corridor is a European Commission initiative for a natural gas supply route from the Caspian and Middle Eastern regions to Europe.

The South Caucasus Pipeline, Trans-Anatolian Pipeline (TANAP), and Trans-Adriatic Pipeline connect Azerbaijan to Europe (TAP). The pipeline is fueled by natural gas from the second stage of Azerbaijan's Shah Deniz gas field in the Caspian Sea.

The pipeline's initial capacity is approximately 10 billion cubic meters of natural gas per year, with the option to increase capacity up to 20 billion cubic meters.

Azerbaijan started commercial gas supplies to Europe via this route, with the completion of the TAP construction on December 31, 2020.

During the pipeline's first year of operation, Azerbaijan supplied 8.1 billion cubic meters of gas to European markets, rather than the planned 5 billion cubic meters. Azerbaijan intends to supply 9 billion cubic meters of natural gas to Europe through the Southern Gas Corridor by 2022.