Moody's: Minority stake in Southern Gas Corridor to be sold to XRG by end-2026

Moody's Ratings has assigned Baa3 long-term local and foreign currency issuer ratings and a baa3 Baseline Credit Assessment (BCA) to Southern Gas Corridor CJSC (SGC), a state-owned company engaged in the production of natural gas and condensate in Azerbaijan, as well as their sale and transportation in the regional and European markets.

Report informs, citing Moody's, that the outlook is positive.

"SGC's Baa3 ratings and a positive outlook are aligned with Azerbaijan's sovereign rating, reflecting the company's strategic importance through its role in representing the state's interests in flagship gas projects, as well as the state's direct and indirect ownership and established track record of support, including guarantees.

The state currently directly owns 49% of shares of SGC, while the remaining 51% is held by State Oil Company of the Azerbaijan Republic (SOCAR, Baa3 stable), a wholly state-owned, integrated national oil and gas company. Despite the planned sale by the state of a minority stake in SGC to XRG, an international investment vehicle of Abu Dhabi National Oil Company, by the end of 2026, we expect the state to retain its control and influence over SGC's strategy and policies.

Therefore, we consider SGC a government-related issuer under our Government-Related Issuers rating methodology, under which the company's rating incorporates a BCA of baa3, reflecting its standalone credit strength, the Baa3 foreign currency rating of Azerbaijan, very high default dependence between the company and the state, and a high probability of government extraordinary support in the event of financial distress," Moody's said.