KEGOC announces repayment of debt by Uzbekenergo

Altynay IbraimovaDecember 25, 2017

On Friday, KEGOC reported on the full repayment of the main Uzbekenergo’s debt under electricity supply contracts and the provision of power regulation services for the period 2011-2017. 

The company notes that over the past few years there have been non-payments from the energy system of Uzbekistan. It should be noted that the Company repeatedly charged the reserve for doubtful debts for this reason. However, the Company managed to achieve a positive outcome of negotiations on debt repayment and the total amount paid by Uzbekenergo for the main debt from 2011 to 2017 was about $ 143mln

In the future, the Company intends to continue cooperation with Uzbekenergo.

Our view

The provision for doubtful debt for 9M2017 amounted to KZT790mn tenge, an increase of 18% compared to 9M2016 mainly due to a violation of the schedule of debt repayment by Uzbekenergo. Repayment of debts of Uzbekenergo means the restoration of the accrued reserve, which will reduce the general and administrative expenses of the Company. At the same time, accrual of the reserve for doubtful debts (T790mln) in the structure of general and administrative expenses is 8%. Given the low proportion of the accrued reserve, we believe the news is neutral for the value of the Company's shares and maintain our "HOLD" recommendation.