S&P: Azerenerji's EBITDA to increase to 540-580M manats in 2025-2026

S&P Global Ratings forecasts Azerenerji OJSC's EBITDA (earnings before interest, taxes, depreciation, and amortization) for 2025 to be between 540 and 560 million manats, Report informs referring to the ratings agency.

Azerenergy's EBITDA for 2024 was 475.7 million manats.

S&P expects the company's EBITDA to increase to 560–580 million manats in 2026: "S&P Global Ratings expects a recent tariff increase to bolster Azerenerji's EBITDA generation over 2025–2027. Azerbaijan's Tariff Council approved an increase in the wholesale electricity tariff, effective from January 2, 2025, to Azerbaijani new manat (AZN) 0.075 per kilowatt-hour (kWh) from AZN0.066 per kWh--the first adjustment to tariffs since the 16% increase in November 2021.

We expect the tariff revision, combined with modest volume growth, to support solid EBITDA generation. We project EBITDA of AZN540 million–AZN560 million in 2025 and AZN580 million–AZN600 million in 2026, compared with AZN475.7 million in 2024. Azerenerji's completion of a new combined-cycle gas turbine (CCGT) plant in June 2025 adds 1,280 megawatts to existing capacities and improves the company"s power generation efficiency, in our view. We project the EBITDA margin will improve to 35% in 2026 from about 33% in 2024, driven by the efficiency gains and the tariff adjustment," reads the message.

The agency expects an increase in capital expenditures (CAPEX) of Azerenerji in 2025.

"The company plans to commission several generation assets, including hydropower plants, and invest in renewable energy projects. Capex is expected to peak at AZN650 million–AZN670 million in 2025 and moderate to AZN550 million–AZN570 million in 2026.

As a result, we anticipate negative free operating cash flow of AZN160 million–AZN180 million in 2025, improving to a neutral amount in 2026. State equity injections are expected to cover a portion of debt service costs, and scheduled amortizations should lead to a slight decline in debt levels. Thus, we forecast funds from operations (FFO)-to-debt comfortably exceeding 30% over the forecast period," S&P added.

S&P believes that the company's main credit risks, including potential increases in working capital or capital expenditures, could be offset by government support.

($1=1.7 manats)