Fitch Ratings Tied Creditworthiness of Azerbaijan Railways to Oil Prices

The international rating agency Fitch Ratings has circulated a report on "The transport sector in the former Soviet Union in the first half of 2015". There is a particular item on the CJSC Azerbaijani Railways.

The agency believes that the volume of rail freight traffic continued to fall in most of the region during the 5 months of 2015, "and we expect that the volume of rail traffic will remain weak in the second half of the year against a background of lower GDP growth rates." Railway companies in this space depend on the transportation of oil, experiencing competitive pressure as the transportation of oil continues to shift in the direction of pipeline transportation.

According to the report, by binding to oil prices the mentioned structures depend on exchange rate fluctuations, although to varying degrees. Sustained weakening of local currencies might negatively impact on their creditworthiness.

Talking about the commissioning of the Baku-Tbilisi-Kars (BTK), experts believe that this factor would further increase the importance of Azerbaijan Railways and JSC Georgian Railways in the transport of goods in the region and strengthen its business profile.

Recall, Azerbaijan, Georgia and Turkey on February 7, 2007 signed an intergovernmental agreement on the establishment of a railway corridor Baku-Tbilisi-Kars. The long-term construction includes the construction of the Kars-Akhalkalaki railway with length of 98 km, of which 68 km will pass through Turkey, as well as the reconstruction of the 183 km section of Akhalkalaki-Tbilisi in Georgia.

The construction of the Georgian part is financed by Azerbaijan, which gave Georgia two concessional loans totaling $ 775 million. So far, the State Oil Fund of Azerbaijan has allocated $ 554 million for the project.

In January 2015 there was a test run of the first train to the border with Turkey. Full commissioning of the Baku-Tbilisi-Kars railway is scheduled for later this year.--17D-