Railways at Risk

One hundred percent belongs to the Government played with CJSC Azerbaijani Railways (ARW), a cruel joke - the international rating agency Fitch Ratings has assigned it a negative outlook for long-term issuer default rating of "BBB-" - in line with the sovereign rating of the economic the stability of the state.

Concerns relate to the structure, above all, the uncertainty of shapes and volume of state expected in the event of an imminent drop in revenues. From the discussion in the Cabinet of Ministers of Azerbaijan Republic "State Railway Development Program in 2016 -2020 years," the agency is waiting for adapting capital expenditure to low world prices for hydrocarbons. This means reduction of financial support for the company.

"From local cargo only minor revenues are received, because still high is dependence of ARW on export, import and transit with a large proportion of oil. Given the falling level of transit cargo in the first half and slowing economic growth across the region, as well as increasing competition in the field of oil transportation through pipelines, we do not expect an increase in the transit of oil and oil products until the end of 2018," write the authors of the analysis.

They believe that ARW will continue to specialize in transit, taking into account the commissioning of the Baku-Tbilisi-Kars railway and the segment of passenger traffic will continue to be low.

In case of increase of the volume of state against the strengthening of the sovereign rating of the country, as well as the sustainable diversification of the economy, supported by reforms to improve transparency and governance and the fiscal position, the rating of ARW can be improved, says the analysis. --17D-