Page 50 - GEORptFeb20

9.2 ​Major corporate news 9.2.1 ​Oil & gas corporate news
First-half net profit at Georgian Oil and Gas Corporation (GOGC) plummeted by 68.5% y/y to $11.9mn, despite robust Ebitda, dragged down by foreign exchange effects, according to unaudited results. Revenue was up 17.8% y/y to $160.4mn in the period, mostly due to a 19.8% y/y ($106.7mn) increase in the sale of gas. Revenue from electricity generation, the second largest revenue category for the company, was up 21.6% y/y, while Georgian lari (GEL) denominated gas pipeline rental revenue was down 7.1% y/y.
Meanwhile, operating expenses increased 14.9% y/y to $130.9mn in the first half of the year. The cost of gas, the largest expense category, which combines gas purchased for resale (85% of cost of gas) and gas used by Gardabani I power plant, grew 19.6% y/y to $114.5mn.
GOGC’s adjusted Ebitda grew by 21.7% y/y to $36.6mn, supported by strong H1 revenues. This translated into an adjusted Ebitda margin of 22.8% in the half, slightly above last year’s level (22.1% in H1 2018).
But the local currency depreciated by 7% y/y against the dollar during the six months, generating a non-cash FX loss of $16.7mn in 1H19, compared to a $11.2mn gain in 1H18.
After upgrading Georgia’s sovereign rating from BB- to BB in October 2019, S&P Ratings lifted GOGC’s rating from B+ to BB-. The decision was backed by GOGC’s strong financial position (sizeable cash balance, stable earnings and steady cash flows from the electricity segment). In addition, S&P Ratings expected the commissioning of Gardabani II in late 2019 to improve the company’s financial position, after a temporary deterioration of credit metrics (high capex, lower cash balance).
Notably, S&P Ratings has not changed Georgian Railway’s credit rating, leaving it at B+, two notches below that of the government.
9.2.2 ​Transport corporate news
The PACE group, a transportation company in Georgia, announced the construction launch for a new $120mn terminal at the country’s Black Sea port of Poti in the presence of government officials, Agenda.ge informed​. ​The supplementary cargo turnover of the new terminal is expected at 2.5mn tonnes, a small fraction of the controversial large port expansion envisaged by APM Terminals, the operator of Poti port that has overall announced plans to build a “deep water ” port with an annual cargo turnover of 50mn tonnes.
However, the depth of the new PACE terminal planned for the future (15m), qualifies it as a deep-water port. A similar area dedicated to the new terminal (25 hectares) and a “second stage” envisaging deepening the terminal to 15m indicates that this new PACE terminal might actually be the first stage of the deep-water port announced by APM Terminals in direct competition to the port project in Anaklia, further up the Black Sea coast. The government stopped APM Terminal’s direct project for such a deep water port this spring, cancelling a preliminary building permit. The size of the PACE investment and the envisaged capacity indicate that it is rather far from being a real threat to Anaklia project, as things stand so far, though.
PACE group, which operates eight berths and a terminal in Poti port,
50​ GEORGIA Country Report​ February 2020 ​ ​www.intellinews.com