Page 17 - Uzbekistan rising bne IntelliNews special report

bne December 2021 Special Report: Uzbekistan Rising I 17
Based on the 1H21 results, UNG generated LTM Ebitda of almost $1bn on revenues of $2.2bn. About 85-95% of the issuer’s Ebitda comes from natural gas sales, which are realised domestically (UNG does not export gas) at a low fixed tariff (USD 23/ kcm), since the company fulfills a social function for the local economy.
The issuer’s margin support comes from low upstream costs, sizeable production and integration into chemicals and refining.
UNG was 3.3x leveraged at the end of 1H21, while its net leverage ratio has not dropped below 3x in the past four years. Apart from heavy exploration capex, since 2019, UNG has been involved in several large-scale investment projects (for a total cost of ~$5.5bn), namely the construction of a gas-to-liquids (GTL) plant and the expansion of the Shurtan gas chemical complex (GCC), which the company is financing via new debt. These sizeable investments have led to UNG’s FCF generation being negative in recent years.
The rating agencies estimate that once completed (GTL by YE21 and GCC in 2023- 24), the projects might increase the company’s Ebitda by more than 50% and contribute to the issuer’s deleveraging. During an investor call, UNG’s management indicated the company’s net leverage ratio target
of 2.5x, which it plans to achieve with new assets coming on stream.
UNG’s total debt portfolio stood
at $3.6bn as of the end of 1H21, comprising of banking debt with the bulk of it denominated in USD (79%)
UNG's extraction highlights
The company is investing large sums in downstream gas processing facilities with an eye on petrochemical and other markets.
Market weighing up Uzbekneftegaz’s scheduled eurobond
Muzaffar Ismailov in Tashkent
S
debut USD-denominated eurobond with a tenor of five and/or 10 years, according to preliminary deal
terms unveiled by VTB Capital.
UNG to date controls around 50% of hydrocarbon deposits in Uzbekistan. In 2020, UNG accounted for 67%
of Uzbekistan’s gas extraction and generated 85% of the country’s electric power, contributing 3.5%
of Uzbekistan’s GDP. The company’s production (33.1bn cubic metres (bcm) of natural gas and 1.6mn tonnes of liquid hydrocarbons in 2020) has been on a downtrend
in recent years, reflecting a lack of investment in exploration in the past.
Fitch and S&P rated UNG on par with Uzbekistan’s sovereign rating (i.e. at BB- with a ‘Stable’ outlook), thanks
to the issuer’s strong ties with the state. Among other things, the state support for the company is reflected in state-debt guarantees, covering some 80% of the issuer’s total debt
at YE20, and the practice of debt to equity swaps, which reduced UNG’s total debt by $1.7bn in 2020 to $3.3bn. Fixed gas tariffs constrain the company's financial performance.
UNG's sales structure (2020)
tate-owned Uzbekneftegaz (UNG), an oil and gas
producer, is marketing its
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