Page 40 - GEORptMar20

In regard to the most important economic development in Georgia—a currency weakening driven by sentiment rather than fundamentals—S&P said it recommended that the central bank build up foreign currency reserves.
“Continued growth of the central bank’s foreign currency reserves should help mitigate any immediate balance-of-payments risks,” its report read. The net foreign currency reserves have been increasing over the past year and S&P analysts said that they expected this to continue over the medium term.
The central bank’s reserves have increased by $250mn on average every year since 2016. Part of this momentum stems from the IMF programme, in place since 2017, and higher reserve requirements for commercial banks against foreign exchange liabilities. However, the increase is also a result of central bank purchases.
8.4.1​ ​International ratings - specific details of rating actions corp/regional etc
S&P upgrades Georgian Oil and Gas Corporation rating to BB-
S&P Global has raised its rating on Georgian Oil and Gas Corporation's (GOGC) long-term debt by one notch to BB-/stable. The move was in response to past action on the Georgia sovereign rating but also reflected diversification achieved by the construction of a gas-fired plant.
GOGC has the status of National Oil Company, protects state interests in the Production Sharing Agreements signed with investors and is the owner of the main gas pipeline system of Georgia.
It is viewed by the government of Georgia as critical to its national energy policy. GOGC is actively pursuing diversification of its business activities through constructing and operating gas-fired thermal power plants.
S&P said that the rating action on GOGC followed similar action on Georgia. It also reflected the rating agency’s view of a very high likelihood of extraordinary state support for the company and its unchanged stand-alone credit profile (SACP) of 'b+'.
In the base case for 2019, S&P currently assumed a temporary deterioration in credit metrics, spurred by higher gas purchasing costs versus flat domestic social gas prices and a peak in capex.
For 2019, the rating agency anticipated debt to EBITDA will peak at 4.7x and FFO to debt will decline to 16% (all ratios are on a gross basis). Still, it said it believed the launch of the Gardabani II power station in late 2019 should facilitate a quick recovery in credit metrics. The plant would contribute about GEL70mn ($26mn ) to GOGC's EBITDA starting from 2020, which should allow debt to EBITDA of below 4.0x and FFO to debt exceeding 20% from the same year.
40​ GEORGIA Country Report​ March 2020 ​​www.intellinews.com