International rating agency Fitch Ratings has assigned a long-term Issuer Default Rating (IDR) of “BBB-” with a Stable Outlook to the Southern Gas Corridor CJSC (SGC), according to a statement released by the agency.
Fitch notes that under its criteria for government-related entities, the rating of SGC is equalized with Azerbaijan’s sovereign rating (BBB-/Stable), as the company’s entire debt is backed by state guarantees.
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“We expect this arrangement to remain in place throughout the rating horizon,” the agency said.
Strong Financial Profile and Predictable Cash Flow
Fitch highlights several key strengths behind the “BBB-” rating:
solid cash flow generation,
high predictability due to long-term gas transportation contracts,
the large scale of operations,
and a very strong financial profile.
The rating is constrained by:
price volatility in the upstream sector,
natural depletion at the Shah Deniz gas-condensate field,
counterparty risks,
and operating-environment limitations across Azerbaijan, Georgia, and Türkiye.
State Support Remains a Critical Factor
Fitch emphasizes that the Government of Azerbaijan maintains significant influence over SGC’s strategic decisions and financial structure, demonstrating “reliable oversight.”
In 2014, the government injected about $2.4 billion in capital, while the State Oil Fund of Azerbaijan (SOFAZ) purchased $2.5 billion in SGC bonds – fully redeemed in 2024.
No Rating Impact Expected from Potential Stake Sale
The agency also expects SGC’s rating to remain unchanged even if Azerbaijan proceeds with the planned sale of a stake in SGC to XRG, an investment platform of the Abu Dhabi National Oil Company (ADNOC).
Fitch analysts believe the state will maintain decision-making authority and control after the transaction.
“We assume Azerbaijan will retain control over SGC. The deal could be positive in terms of corporate governance, technology, and easier access to financing if project capacity expansion is pursued,” the agency said.
About the Southern Gas Corridor
Southern Gas Corridor CJSC is owned by the Government of Azerbaijan (49%) and the State Oil Company of Azerbaijan (SOCAR) (51%).
The Southern Gas Corridor was constructed to deliver natural gas from the Caspian region to Europe. Azerbaijan began exports through the corridor on December 31, 2020.
Its main components include:
Shah Deniz Stage 2,
expansion of the South Caucasus Pipeline (Azerbaijan–Georgia–Türkiye),
construction of the TANAP pipeline across Türkiye,
and the TAP pipeline connecting Greece, Albania, and southern Italy.
With European demand for Azerbaijani gas increasing, plans are underway to expand the corridor by boosting capacity on both TANAP and TAP for additional European deliveries.
