research reports

Home > research reports
Forgot password?
Not a member yet? Register now
Year: Month: All releases Economy Sectors Companies
2 / 42

Georgia's Energy Sector - Electricity Market watch - August 2018

2 Oct, 2018

Electricity consumption growth rate was revised upwards by 3ppts for 2018. On August 27, 2018 Ministry of Economy and Sustainable Development updated the forecast of electricity (capacity) balance for 2018. Based on this document, forecast for electricity consumption in 2018 was revised upwards to 13.0TWh, which is 9.9% y/y increase and the highest growth of electricity consumption since 2010. This growth in demand expected to be satisfied by increased thermal generation and imports. Notably, imports are planned at last year’s record high level. The new balance also incorporates the changes into legislation made in May 2018 regarding the eligibility criteria for direct consumers and traditionally includes actual figures for 7M18.

Electricity consumption growth slowed in August 2018, increasing by just 1.0% y/y after the 11.8% y/y growth during May-July period. The slowdown in growth can be explained by the high base of August 2017 (+14.4%) and favourable weather conditions leading to decreased needs for air-conditioning. Domestic consumption of electricity in 8M18 was up by 7.7% y/y. Eligible consumers’ increased their consumption by 24.4% y/y, explained by addition of new companies to the group of eligible consumers, in line with legal changes effective since May 2018. Consumption by distribution licensees was down by 3.1% y/y in August 2018, caused by above-mentioned reallocation of eligible consumers and favorable weather conditions.

There was no export of electricity in August 2018 because of the deficit in the system. Generally, August is considered as an export month, but high growth in electricity consumption led to significantly low exports of electricity during 2015-2017 (3-year average at 28GWh).

Drop in hydro generation (-12.3% y/y) caused thermal generation (+81.2% y/y) and imports (+36.7%y/y) growth in August 2018. The low volume of hydro Generation is explained by bad hydrological conditions and maintenance works on some regulated HPPs. Notably, generation of new HPPs increased in August, contributing positively to the total supply of electricity. A 9.2% of electricity demand was satisfied by electricity imports from Azerbaijan (65.7% of imports) and Russia (34.3%).

Wholesale market prices in Georgia increased 0.6% y/y to USc 4.7/kWh in August 2018. A 16.4% of total electricity supplied to the grid in August 2018 was traded through the market operator ESCO, with the rest traded through bilateral contracts.

Turkish electricity prices increased by dramatic 70.6% y/y in TRY terms, but in US$ terms y/y growth was mere 4.6%. This was market reaction to TRY’s radical depreciation in August 2018 as energy sector is highly sensitive to FX movements and is anchored to US$, based on analysts’ assessments. In august 2018, average electricity prices in Turkey reached US$ 5.3/kWh

Download report (English)
Read More

Georgian Oil and Gas Corporation - 1H18 update

26 Sept, 2018

GOGC released 1H18 unaudited results. Revenue was down 18.0% y/y to US$ 136.1mn in 1H18, mostly due to a 15.0% y/y decrease in sale of gas to US$ 89.1mn. Revenue from electricity generation, second largest revenue category, was also down 14.7% y/y to US$ 33.4mn. Rent from gas pipelines almost halved in the reporting period, falling 47.2% y/y to US$ 8.5mn due to the new tariff methodology introduced in Sep-2017. Operating expenses shrank 8.3% y/y to US$ 113.9mn in 1H18. Considerably decreased revenues caused a 39.8% y/y drop in adjusted EBITDA in 1H18 to US$ 30.0mn. The Gardabani II CCPP construction is on track with c.30% of the total project cost already invested as of 1H18.

GOGC reported US$ 136.1mn revenue in 1H18, down 18.0% y/y. Drop in gas sales (-12.9% y/y to 766 mmcm), mostly driven by reduced gas demand for power generation, was the major reason behind the 15.0% y/y decrease of gas sales revenue to US$ 89.1mn. Electricity sales, which made up 24.5% of total revenue in 1H18, shrank 14.7% y/y to US$ 33.4mn due to electricity balance specifics. The pipeline rental revenue sharply declined to US$ 8.8mn (-47.2% y/y). This was caused by replacing the volume-based pricing with a fixed monthly fee of GEL 3.5mn according to the modification of the pipeline rental agreement between GOGC and the state-owned operator of the gas pipeline system (Georgian Gas Transportation Company) in Sep-2017. Revenue from the sale of crude oil dropped 52.3% y/y to US$ 0.9mn in the reporting period. Oil transportation revenue was the only revenue category in the green, up 7.2% to US$ 4.2mn.

1H18 operating expenses were down 8.3% y/y to US$ 113.9mn as cost of gas dropped 12.3% y/y. Due to lower gas consumption, gas volumes purchased by GOGC’s decreased 13.7% y/y in 1H and this combined with a 6.5% y/y increase in average gas purchase price caused cost of gas sold to drop by 10.3% y/y to US$ 83.8mn (87.6% of the total gas costs). The cost of gas used in electricity generation also dropped 24.0% y/y to US$ 11.9mn due to the reduced demand on gas from Gardabani I. Other expenses, accounting for 4.2% of the total, almost doubled reaching US$ 4.8mn, driven by the increased costs for banking, consulting and other professional services.

On the back of the decreased revenue, 1H18 adjusted EBITDA dropped 39.8% y/y to US$ 30.0m. As a result, the adjusted EBITDA margin contracted from 30.1% in 1H17 to 22.1% in 1H18. The FX gain was down 40.0% y/y to US$ 11.2mn as GEL’s appreciation against USD was 5.4% in 1H18 vs. 9.1% in 1H17. A US$ 0.9m income was received from GOGC’s 49.9% shares in Kartli Wind Power Station in 1H18.  All of the above contributed to the 41.1% y/y decrease in net income to US$ 37.8mn.

Operating cash flow was at US$ 27.4mn in 1H18, compared to US$ 37.3mn in 1H17. In 1H18 GOGC’s operating cash flow was reduced by US$ 2.6mn due to interest payment on a US$ 26.0mn 2-year loan facility, borrowed in 2017. Construction of Gardabani II CCPP is on track, with US$ 46.2mn or c.30% of total already invested in 1H18. GOGC plans to invest additional US$ 74.0mn in 2H18, while the remaining portion (US$ 50mn) will be spent in 2019.

Download report (English)
Read More

Regional Fixed Income Market Watch | Aug 2018

20 Sept, 2018


  • Real GDP growth in the US was revised up to an annualized 4.2% y/y (second estimate) from an annualized 4.1% y/y (advance estimate) in 2Q18. In August 2018, unemployment rate was unchanged at 3.9%. Turkey’s economy grew by 5.2% y/y in 2Q18 after growing 7.3% y/y in 1Q18.
  • Based on rapid estimates, in July 2018, economic growth came in at 11.1% y/y in Armenia, 4.6% y/y in Georgia, 3.8% y/y in Kazakhstan, and 2.8% y/y in Russia. In 7M18, real GDP growth was 4.4% y/y in Belarus and 0.2% y/y in Azerbaijan.
  • In August 2018, annual inflation in the US was 2.7% down from 2.9% in previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 2.0% in August 2018 down from 2.1% in July 2018.
  • In August 2018, annual inflation was close to the target level in Georgia (3.1%), Russia (3.1%) and Armenia (3.3%); inflation was within the target range in Kazakhstan (6.0%), and above the target in Ukraine (9.0%) and Turkey (17.9%); inflation was 2.0% in Azerbaijan.
  • Monetary policy rate increased to 7.5% (from 7.25%) in Russia, 18.0% (from 17.5%) in Ukraine and 24.0% (from 17.75%) in Turkey as of September 18, 2018. The policy rate has remained unchanged in other countries.
  • In August 2018, Moody’s and S&P downgraded sovereign credit ratings for Turkey: 1) Moody’s lowered credit rating to Ba3 from Ba2 and the outlook was revised to negative from stable, and 2) S&P lowered credit rating to B+ from BB- (for foreign currency) and to BB- from BB (for local currency) and the outlook remained unchanged at stable.

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

Download report (English)
Read More

Georgia's Energy Sector - Electricity Market watch - July 2018

12 Sept, 2018

Energy sector is one of the strategically important sectors under newly adopted Public-Private Partnership law. The legislation, among others, envisages the possibility of granting long-term guaranteed purchase agreement to the investor. The law on Public-Private partnership was approved by the Parliament of Georgia in May 2018. Later in August 2018, the government of Georgia adopted the rule for PPP projects screening and implementation. These documents define the general framework for PPP projects initiation, partner finding and monitoring.

The project initiation and private partner finding process under PPP framework is generally led by special entities, based on transparent and competitive principles. The energy sector has some exemptions from general rules, e.g: for the projects larger than 100MW, the initiation process must include feasibility study conducted by independent company; all energy sector PPP projects should be agreed with the government despite the size of the project; private companies are allowed to initiate the project; the Government has right to allow closed and direct negotiations with only one partner, skipping the public tendering and evaluation procedure.

The export season of 2018 ended with total export of 588.3GWh (-9.9% y/y). The decrease in 7M exports is explained by: 1) last year’s high base due to unexpected surplus in hydro generation, 2) disruption of export caused by Enguri’s emergency closure in May-2018, 3) low prices on Turkish market, incentivizing companies with TDAs (e.g. Georgian Urban Energy) to sign additional agreements with the GoG and limit export to only May-July period in favor of increased local supply.  Although the volume of exported electricity was down, its total value increased by 13.8% y/y to US$ 19.0mn, as Russia’s share (which pays low price vs other markets) in total exports decreased y/y. The electricity trade deficit stood at US$ 11.8mn in 7M18 and was down 40.8% y/y as growth in exports partly absorbed imports.

Domestic electricity consumption increased 10.8% y/y in July 2018 and 8.8% y/y in 7M18. The eligible consumers and distribution licensees drove this growth. The demand was satisfied by hydro generation in July 2018. Hydro Generation increased slightly (+1.5% y/y) and reached 1.3TWh, supported by good hydrological conditions and commissioning of new HPPs. Meanwhile, the maintenance works on some regulated HPPs dragged the supply. Enguri/Vardnili generation (+11.2% y/y) satisfied 65.9% of electricity demand in July 2018. In 7M18 generation of Enguri/Vardnili increased 24.8% y/y and reached its record high generation since 2010 (3.2TWh). Thermal generation and imports accounted for 0.7% of total electricity supply, used only for system’s balancing and stability purposes.

Download report (English)
Read More
what we do management media center transactions contact
© 2014 Galt & Taggart | Creating Opportunities
Created by sbdigital