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Regional Fixed Income Market Watch | March 2018

13 Apr, 2018

Highlights

  • 4Q17 US GDP growth was revised up to an annualized 2.9% y/y (3rd estimate) from an annualized 2.5% y/y (2nd estimate). The growth was driven by personal consumption expenditures, fixed investments, exports and government spending. 
  • Based on rapid estimates, in February 2018 economic growth came in at 7.3% y/y in Armenia, 5.6% y/y in Kazakhstan, 5.5% y/y in Georgia and 1.5% y/y in Russia. In 2M18, GDP was up 5.6% y/y in Belarus and 1.3% y/y in Azerbaijan. Economic growth in Turkey came in at 7.3% y/y in 4Q17. 
  • In February 2018, annual inflation in the US was up 2.2% from 2.1% in the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was up to 1.4% in March 2018 from 1.1% in February 2018.
  • In March 2018, annual inflation was close to the target level in Georgia (2.8%), Kazakhstan (6.6%), Armenia (3.7%); Inflation was below the target in Russia (2.4%) and above the target in Turkey (10.2%) and Ukraine (13.2%). In February 2018, annual inflation retreated to 3.9% in Azerbaijan and 4.9% in Belarus.
  • Russian central bank cut monetary policy rate to 7.25% from 7.5% in March 2018. The policy rate has remained unchanged in other countries.
  • Fitch affirmed Georgia’s sovereign credit rating at BB- and revised the Outlook to positive from stable, Moody’s upgraded Belarus credit rating to B3 from Caa1 and Moody’s revised Armenia’s Outlook to positive from stable in March 2018.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Georgia's Energy Sector - Electricity Market Watch | February 2018

12 Apr, 2018

FDI in energy sector increased 61.0% y/y to US$ 188.6mn in 2017. The largest FDI providers were: Energo-pro Georgia and related companies - Energo-pro Generation and G-Power; Adjaristskali Georgia - investor of Shuakhevi HPP, Mtkvari Holding and Nenskra Hydro - investors of Mtkvari HPP and Nenskra HPP, respectively. 

Domestic electricity consumption increased 4.6% y/y to 1.1TWh, slightly below the planned level (-2.5%). The sole contributors to consumption growth were distribution licensees: 1) Energo-Pro Georgia subscribers’ consumption increased by 16.3% y/y. The growth can be explained by addition of new subscribers; 2) Telasi consumption was up 2.3% y/y, albeit from a high base in February 2017 (+8.3% y/y). 

Electricity generated by domestic sources increased by 15.4% y/y to 0.9TWh in February 2018, slightly above (+3.5%) the planned level. Hydro generation showed significant increase (+64.3%y/y) in February 2018 from a very low base (-33.1%y/y) in February 2017. Enguri/Vardnili generation more than doubled increasing 119.6% y/y from last year’s low base when Enguri was stopped due to tunnel expertise. Abkhazian region consumed 94.8% of electricity generated from Enguri/Vardnili. Generation of other regulated and deregulated HPPs also increased significantly by 40.2% y/y and 44.6% y/y, respectively, due to high water flow and addition of new HPPs (Dariali and Khelvachauri) to the group of deregulated HPPs. The surplus in hydro generation resulted in 24.4% y/y decline in thermal generation, about 16.6% below the planned level. Wind generation showed 7.0% increase to 6.2GWh and contributed 0.6% of total supply.

Electricity imports were down by 32.8% y/y from last year’s high base, when interruption in Enguri increased demand for imports drastically. Import came fully from Azerbaijan and accounted for 15.2% of total electricity supplied to the grid. Average import price increased by 52.2% y/y and reached USc 5.3/kWh, from last year’s low base (-22.6% y/y). In February 2017, there was a subsidized electricity import from Russia via Salkhino line to satisfy the excess needs of Abkhazian region.


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Georgia's Energy Sector - Electricity Market Watch | January 2018

15 Mar, 2018

Total investment for transmission projects is estimated at EUR 683.9mn over 2018-2028. The Ten Year Network Development Plan (TYNDP) for 2018-2028 approved on 28 December 2017 incorporates revised forecasts of electricity consumption growth, and updated pipelines of power plant and transmission network projects. The TYNDP targets 49% of total investment to be spent over 2018-2020, mostly financed by credits from IFIs (KfW, EBRD, WB, ADB, EU-NIF) and GSE’s own resources. Under the previous edition of TYNDP total estimated investment stood at EUR 735.4mn, and the decrease largely reflects already implemented projects in 2017. Commissioning dates for cross-border transmission projects were revised to 2020 from 2018 for 400kV line Marneuli (Armenia) and 154kV line Batumi-Muratli (Turkey), to 2021 from 2020 for 400kV line Akhaltsikhe-Tortum (Turkey) and to 2023 from 2021 for 500kV line Stepantsminda (Russia).

Forecast for electricity consumption growth was revised upwards in TYNDP 2018-2028. The annual consumption growth rates in the pessimistic, moderate and optimistic scenarios are revised upwards from 1.0%, 3.5% and 5.0% to 3.0%, 5.0% and 7.0%, respectively. The generation scenarios vary by the assumed rates of commissioning for the power plant projects at different stages of development. The base case scenario is assumed to be L3G3, with consumption growth rate at 7.0% (reaching 27.9TWh in 2029) and full utilization of HPPs under construction, licensing and development stages, resulting in 32.3TWh total domestic generation in 2029. The base case scenario gives approximately 4.4TWh of net exports in 2029. 

LEAP model for Georgia forecasts 3.9% annual average growth of domestic consumption over 2015-2030. The Long-range Energy Alternatives Planning (LEAP) model was developed by Energy Efficiency Center Georgia (EEC), under the USAID’s Governing for Growth (G4G) grant project “Electricity Demand Forecasting Model”, enabling forecasting of monthly electricity demand and peak loads. The model uses a bottom-up approach, evaluating the end-use in household, commercial and public services, industry, transport, agriculture, forestry and fishing, crypto-currency mining, Abkhazian region and the losses of the system.

Renewable energy primary law for Georgia is expected to be adopted in August, 2018. The draft is being prepared with the assistance of the Norwegian Water Resources and Energy Directorate and Danish consortium NVE-NIRAS. The project aims to fulfill Georgia’s obligation under Energy Community treaty towards implementation of directive N2009/28/EC. The directive requests contracting parties to set and therefore achieve national goals for the share of renewable energy into the total sources consumed in transport, electricity, heating and cooling in 2020. The law should define states’ policy principles, missions, and general requirements, also promote the schemes supporting renewable energy. 

Domestic electricity consumption in January, 2018 increased 7.6% y/y to 1.2TWh, slightly below the planned level (-2.3%). The growth was driven by 11.9% increase in consumption by distribution licensees: consumption by Energo-Pro Georgia subscribers, including former Kakheti Energy Distribution subscribers, increased 17.2% y/y, from relatively low level in January 2017 (2.7%y/y); Telasi consumption was up 3.6% y/y, albeit from a high base in January 2017 (+10.5% y/y). Electricity usage by eligible consumers showed slight increase (+0.9%y/y), while Abkhazian regions consumption was down 1.9%y/y. 

Electricity generated by domestic sources in January, 2018 increased by 6.1% y/y to 1.0TWh, slightly above (+2.2%) the planned level. Hydro generation showed significant increase (+19.9%y/y) from a low base (-10.4%y/y) in January, 2017. Enguri/Vardnili generation was slightly down 2.7% y/y, while generation of other regulated and deregulated HPPs increased 43.9% y/y and 34.4% y/y, respectively. Thermal generation declined 14.0% y/y, which was 18.3% below the planned level. Wind generation increased 9.6%y/y to 7.1GWh and contributed 0.6% of total supply. Electricity import increased 12.9% y/y to 202.1GWh, and accounted for 16.6% of total electricity supplied to the grid in January 2018. Notably, electricity import was 22.5% below the planned level. 92.2% of imported electricity came from Azerbaijan, while the rest came from Russia (4.0%) and Armenia (3.7%).


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Regional Fixed Income Market Watch | February 2018

13 Mar, 2018

Highlights

  • US GDP growth in 4Q17 was revised down to an annualized 2.5% y/y (2nd estimate) from an annualized 2.6% y/y (advance estimate). GDP growth in EU19 was 2.7% y/y in both 3Q17 and 4Q17.
  • Based on rapid estimates, in January 2018 economic growth was 10.2% y/y in Armenia, 4.7% y/y in Kazakhstan, 4.6% y/y in Belarus, 4.4% y/y in Georgia, 2.5% y/y in Russia, and 2.0% y/y in Azerbaijan. Economic growth in Ukraine came in at 1.8% y/y in 4Q17.  
  • Annual inflation in the US was 2.1% in January 2018 unchanged from December 2017. Based on the Eurostat flash estimate, annual inflation in EU19 was down to 1.2% in February 2018 from 1.3% in January 2018.
  • In February 2018, annual inflation decreased in Georgia (2.7%), Kazakhstan (6.5%), Turkey (10.3%) and Ukraine (14.0%) and increased in Armenia (3.3%). In Russia inflation remained unchanged at 2.2% in February 2018. January 2018 figures indicate a decrease in annual inflation to 4.5% in Belarus and 5.5% in Azerbaijan.
  • As of 12 March 2018, monetary policy rate is 13.0% (down from 15.0%) in Azerbaijan, 10.5% (down from 11.0%) in Belarus, 7.5% (down from 7.75%) in Russia and 9.5% (down from 9.75%) in Kazakhstan. Meanwhile, the policy rate was raised to 17.0% from 16.0% in Ukraine. The policy rate has remained unchanged in other countries.
  • S&P raised both foreign and local sovereign credit ratings for Russia to BBB- from BB+ and to BBB from BBB-, respectively and the outlook was revised to stable from positive. Moody’s downgraded credit rating of Turkey to Ba2 from Ba1 and changed the outlook to stable.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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