Tashkent, Uzbekistan (UzDaily.uz) — International rating agency Fitch Ratings has revised the outlook on Uzbekhydroenergo JSC’s long-term issuer default rating from positive to stable, while affirming the rating at BB. The company’s standalone credit profile (SCP) remains at b+.
The outlook revision follows changes to Fitch’s methodology for assessing government-related entities. The agency will no longer automatically align Uzbekhydroenergo’s rating with Uzbekistan’s sovereign rating, as it expects the share of the company’s debt backed by state guarantees to gradually decline.
At the same time, Fitch has raised its assessment of government support from 20 to 30 points, indicating a very high likelihood of assistance from the state. However, despite the significant role of government support, the company’s future rating movements will not necessarily mirror changes in Uzbekistan’s sovereign rating.
Uzbekhydroenergo’s standalone credit profile is constrained by limited predictability in tariff regulation and Fitch’s assessment of Uzbekistan’s operating environment. At the same time, the agency highlights the company’s monopoly position in the country’s hydropower sector, high operating profitability, expanding operations and cautious approach to debt management.
Fitch assesses the company’s credit profile before accounting for the operating environment at bb-, compared with b+ after that factor is taken into consideration. Improvements in Uzbekistan’s business environment could support an increase in the company’s standalone creditworthiness.
One of the key factors behind the revision is the expected change in the structure of the company’s liabilities. Fitch forecasts that around 75% of Uzbekhydroenergo’s debt will be backed by state guarantees in 2026–2028. At the same time, the company is increasingly raising financing without such guarantees, which the agency views as evidence of gradually improving financial independence.
A larger share of unguaranteed borrowing could increase the company’s financial flexibility and strengthen its liquidity. Fitch has also upgraded its assessment of Uzbekhydroenergo’s role in implementing government policy to “strong”. State control over the company’s strategy and operations, as well as its track record of receiving support, have been assessed as “very strong”.
The agency also expects hydropower to play an increasingly important role in Uzbekistan’s energy strategy. The development and modernisation of hydropower plants are expected to increase electricity generation, strengthen energy independence and reduce gas consumption through the expansion of renewable energy sources.
Under the company’s investment plans, Uzbekhydroenergo’s capital expenditure could average 3.7 trillion soums (approximately US$310 million) annually in 2027–2029. By comparison, capital expenditure in 2024–2026 was estimated at 2.4 trillion soums (approximately US$200 million) per year.
Fitch expects higher investment to be accompanied by an expansion and modernisation of generating capacity. The investment programme is partly offset by a conservative debt management policy. The company intends to keep net debt to EBITDA at around 3.0x and prevent it from exceeding 3.5x.
Fitch forecasts that the debt-to-funds-from-operations (FFO) ratio will average around 3.0x in 2027–2029. The agency considers this level strong for the company’s current credit profile.
Tariff policy remains another important factor. In early 2026, Uzbekistan introduced a regulated asset base (RAB) methodology for energy companies. Fitch views the reform as moderately positive because it is intended to make revenue more predictable and encourage investment. However, tariff periods remain limited to one year, complicating long-term financial planning.
The company’s financial performance is also affected by settlements with other participants in the energy supply chain and its dependence on payments from counterparties for electricity. The accumulation of trade receivables has previously constrained its financial flexibility. In 2025, receivables declined alongside lower revenue, which Fitch considers a positive development.
At the end of 2025, Uzbekhydroenergo held 1 trillion soums (approximately US$80 million) in cash and cash equivalents, while short-term debt stood at around 460 billion soums (approximately US$38 million). The company plans to repay short-term liabilities using operating cash flow.
Most of its debt consists of low-interest loans denominated in US dollars and euros and provided by domestic and foreign banks. Most of these loans are backed by state guarantees, and repayments are scheduled to be made gradually.
Nevertheless, Fitch expects negative free cash flow in 2026–2029, partly due to the potential accumulation of trade receivables. The company is also exposed to foreign exchange risk: almost all its debt is denominated in foreign currencies, while most of its revenue is received in soums. It does not use foreign exchange hedging instruments.
Among the other risks identified by Fitch is asset concentration. The company’s largest hydropower cascade accounts for around 40% of its installed capacity, while electricity generation volumes depend on the country’s hydrological resources. These risks are partly mitigated by efficient plant operations and low marginal electricity generation costs.
Fitch also compared Uzbekhydroenergo with several international and domestic companies. The agency considers the Uzbek company’s business profile somewhat weaker than that of Turkish renewable energy producer Aydem Yenilenebilir Enerji Anonim Sirketi, which has higher-quality assets and more predictable revenue. ENERGO-PRO a.s. benefits from a more favourable operating and regulatory environment in the markets where it operates.
Among Uzbek companies, the ratings of Thermal Power Plants JSC and Regional Electric Networks JSC are aligned with the country’s sovereign rating, reflecting their significant reliance on government financing and guarantees. A similar approach applies to Almalyk Mining and Metallurgical Complex JSC, given the very high likelihood of government support. The rating of Navoi Mining and Metallurgical Company JSC is capped at Uzbekistan’s sovereign rating.
Under its base-case scenario, Fitch assumes that Uzbekistan’s GDP will grow by an average of 6.3% annually in 2026–2029, the average US dollar exchange rate will be around 12,600 soums, and Uzbekhydroenergo’s annual electricity generation will reach 8.6 TWh.
The agency also assumes that effective tariffs will rise by 7% in 2027 and then be indexed to inflation from 2028. Other assumptions include average annual capital expenditure of around 3.3 trillion soums and minimal dividend payments.
A downgrade could follow a deterioration in Uzbekistan’s sovereign rating, a significant weakening of the company’s ties with the state or a decline in operating performance. Other risks include an excessively ambitious investment programme, an increase in trade receivables or dividend payments that cause the debt-to-FFO ratio to remain above 5.0x.
An upgrade could be supported by stronger ties with the government, an improved operating environment and greater predictability in tariff regulation. In particular, the introduction of multi-year tariff planning, combined with a stronger financial profile and a sustained reduction in the debt-to-FFO ratio below 3.0x, could improve the company’s credit assessment.
Uzbekhydroenergo operates around 50 hydropower plants across Uzbekistan, as well as micro hydropower plants. Its installed capacity totals 2.4 GW, accounting for around 10% of the country’s total electricity generation. The Government of Uzbekistan is the company’s ultimate owner.
According to Fitch, climate-related factors do not indicate elevated risk for the company. Environmental, social and governance (ESG) factors have been assigned a relevance score of 3, corresponding to a neutral or minimal impact on the issuer’s creditworthiness.