Fitch assigns 'BB-' rating with stable outlook to Andijan region

The international rating agency Fitch Ratings has confirmed the long-term issuer rating (IDR) of the Uzbek operator Uzbektelecom at 'BB' with a positive outlook, while simultaneously upgrading its independent credit profile (SCP) from 'bb-' to 'bb'. The agency published this statement on November 9, 2026.

Fitch explained this upgrade by citing expectations of improved free cash flow and a gradual reduction in the company's debt burden over the next two years. Analysts note that these improvements will be supported by Uzbektelecom's strong domestic market position, subscriber base expansion, and moderate debt levels.

The company's long-term IDR aligns with Uzbekistan's sovereign rating, which is also 'BB'. Fitch believes that state support is 'extremely likely', and the positive outlook for Uzbektelecom is consistent with the forecast for the country's sovereign rating.

According to Fitch data, the state owns 94% of Uzbektelecom shares. The government determines the company's main strategic priorities, investments, and key functions in information security. Furthermore, the state guarantees about 43% of the company's external debt, and the agency forecasts that this share will exceed 50% by the end of 2027.

Uzbektelecom holds a leading position in the country's telecommunications market. According to Fitch estimates as of the end of September 2026, the company accounted for about 32% of the mobile market and 85% of the fixed broadband internet market.

Nevertheless, significant capital expenditures continue to constrain free cash flow. Fitch forecasts that capital expenditures will constitute 49% of revenue in 2026, after which they will begin to decline to approximately 27% by 2028. Under the agency's base case scenario, this figure should fall to about 20% by 2029.

Fitch forecasts that the net debt to EBITDA ratio will rise from 2.3 times in 2025 to 2.8 times in 2026, and then gradually decrease to 2.6 times by 2028. The agency believes that maintaining this ratio below three times during the forecast period supports the 'bb' independent credit profile rating.

Fitch also highlighted currency risk: about 90% of Uzbektelecom's debt is denominated in foreign currency, while most revenue is generated in sums. The company does not use currency hedging instruments.

Uzbektelecom is preparing for a potential international Initial Public Offering (IPO) as part of the privatization program. Fitch noted that the potential offering itself will not affect the rating, as the agency expects the state to maintain a controlling stake in the company.

The international rating agency Fitch Ratings assigned the Joint Stock Company of National Electric Networks of Uzbekistan (NEGU) its first long-term credit rating of 'BB' with a positive outlook on November 3, 2026.

This rating corresponds to Uzbekistan's sovereign rating, which is also 'BB' with a positive outlook. The agency explains this correspondence by citing the share of state-guaranteed debt as the main reason.

According to Fitch Ratings, about 90% of the company's debt as of the end of 2025 and in the first half of 2026 is either backed by state guarantees or provided directly by the state. Most of this debt comes from loans from international financial institutions.

Fitch expects this share to remain above 75% at least until 2028, even if some new investment projects are financed without guarantees. If the share drops below 75%, the agency may change its approach to rating determination.

Meanwhile, Fitch assesses the company's standalone credit profile as 'b'. This assessment is limited by the country's short regulatory experience, limited transparency, risks associated with transmission volumes and counterparties, and weak financial flexibility.

Among the factors contributing to the strengthening of the company's position are its monopoly in electricity transmission, industry reforms including the separation of trading activities, and expected high profitability. Fitch notes that the rating may improve as fair regulation experience develops.

After establishing a single buyer in 2024, NEGU gradually separated its loss-making trading activities. Fitch believes this has contributed to increasing the company's profitability and reducing cash flow volatility.

The government plans to complete the transition to tariffs based on a regulated asset base starting in 2027. Some elements of the new system were introduced during the tariff review in August 2026. Following three increases during 2025–2026, NEGU's electricity transmission tariff in August 2026 doubled the 2024 level.

The company itself forecasts an annual tariff indexation of approximately 5% starting in 2027. Fitch's forecasts suggest growth of about 11% in 2027 and approximately 5% annually from 2028 onwards.

At the same time, the agency points to limitations in the regulatory framework. The company operates based on short-term tariff decisions, and mechanisms to protect against reduced transmission volumes, ensure fair return on investment, and regulator response to inflation or currency devaluation have not been fully tested.

Fitch also identifies potential interference in tariffs for political or social reasons, as well as the absence of an independent regulator, as risks. NEGU's key counterparty, the single buyer, acts only as an intermediary in the flow of funds, so the company depends on the payment discipline of end consumers. Furthermore, it relies on a non-transparent mechanism for distributing payments among market participants, over which it has no control.

Due to aging infrastructure and growing electricity demand, the company faces significant investment needs. Its business plan includes capital expenditures of $1.5 billion between 2026 and 2030. These funds will be directed towards connecting new generation capacity, improving network reliability and digitalization, and developing high-voltage transmission lines.

Most projects require government approval and funding. Multilateral financial institutions are expected to finance about half of the program, while the remainder will be covered by public-private partnerships and the company's own resources.

Fitch forecasts that the company's free cash flow will be negative during 2026–2030, averaging about 1 trillion soums ($80 million) annually. EBITDA is projected to average 3.5 trillion soums ($280 million) per year, while capital expenditures are expected to reach 3.7 trillion soums ($295 million). This forecast does not include dividend payments. The FFO-adjusted leverage ratio is expected to decrease to an average of around 4x during 2026–2029, compared to 6.7x in 2025.

About 90% of the company's debt at the end of 2025 was denominated in foreign currency, while revenue is generated in soums. Hedging instruments in Uzbekistan are limited. However, Fitch anticipates a moderate depreciation of the sum against the US dollar, averaging 2% annually, which limits the impact of currency risks on its forecasts.

Fitch rates the state's willingness to support the company as high. The state fully controls NEGU, approves its strategy and investment plans, and sets tariffs. In 2024–2025, the company received network assets worth about $400 million from other state enterprises free of charge.

Fitch also considers NEGU's role as a natural monopoly and the strategic importance of its projects for the development of renewable energy sources and public-private partnerships. The company employs about 9,000 people.

As of the end of June 2026, NEGU had cash reserves of 481 billion soums ($40 million) compared to short-term debt of 546 billion soums ($46 million). Repayments to third parties are expected to amount to about 500 billion soums ($40 million) annually from 2027–2029.

The company plans to cover its negative cash flow through new bank loans. In 2026, NEGU expects to receive $145 million under guaranteed credit lines from international banks. The government has also signed an agreement to obtain an investment loan of $200 million from the Asian Development Bank, the funds of which will be transferred to the company.

The rating could be downgraded if the outlook for Uzbekistan's sovereign rating is changed to 'Stable' or if the sovereign rating itself is lowered. Another potential trigger could be a drop in the guaranteed debt share below 75%. A rating upgrade is possible if the sovereign rating improves, provided the state continues to guarantee more than 75% of the company's debt.

S&P Global Ratings assigned long-term issuer credit ratings of BB- in both local and foreign currencies to the administration of the Andijan region on November 6, 2026. The agency noted that the outlook remains stable.

Andijan, located in the Fergana Valley in eastern Uzbekistan, benefits from strong financial performance and the absence of commercial debt. However, analysts pointed out that the rating limitations are due to the low level of regional welfare and uncertainty caused by an unstable institutional environment that limits predictability.

The stable outlook reflects a balance between a history of balanced budgets and low debt burden on one hand, and risks associated with the unstable regulatory framework governing local and regional authorities of Uzbekistan on the other. Furthermore, key budgetary decisions are made by the central government, and the influence of regions, including Andijan, on them is limited.

S&P drew attention to the frequent changes in approach to major taxes, transfers, and expenditure obligations by the central government. The last such changes occurred at the end of 2025. This undermines the stability of the region's revenue and expenditure commitments, making medium-term planning difficult.

According to analysts, debt and liquidity management practices are still in the early stages. For example, the practice of placing funds in commercial banks was only introduced in 2026, and its effectiveness has not yet been tested.

The agency characterizes the region's economy as weak by both national and international standards. GDP per capita is estimated at $2,800–$2,900, which accounts for about 64% of the national average. Nevertheless, Andijan is one of the most industrialized regions in Uzbekistan, ranking fourth in the country and accounting for 10.5% of industrial production. This is largely due to the automotive cluster around the UzAutoMotors plant in Asaka. S&P forecasts that real GDP per capita growth in 2027–2028 will average about 6.5%, consistent with the national forecast.

The agency expects the region to maintain strong budget performance. It is projected that the Andijan region will demonstrate a balanced budget or a small surplus over the next three years. According to S&P data, the region's operating income in 2025 was 6.27 trillion soums, while operating expenses reached 6.21 trillion soums, resulting in an operating balance of 62.5 billion soums. For 2026, the agency expects operating income of about 6.2 trillion soums and an operating surplus of 45.8 billion soums.

Social expenditures account for 80% of the regional budget, which limits its flexibility. S&P forecasts an increase in capital expenditures from 292 billion soums in 2026 to 650 billion soums in 2027, aligning with the region's goal of increasing infrastructure investment. These investments are expected to be financed primarily through capital transfers from the central budget.

The region's debt burden remains very low. Current legislation prohibits local and regional authorities from taking on commercial debt, and any budget deficit is covered by additional transfers from the central government. Andijan has no commercial debt, and its debt to the central budget does not exceed 1% of operating income, including transfers. Direct debt at the end of 2025 amounted to 22.5 billion soums, equivalent to 0.4% of operating income.

The sector of organizations related to regional authorities is small. The regional administration owns shares in approximately 50 companies, mainly agricultural markets. The agency found no instances of regional subsidies, capital injections, or emergency support for these companies. Districts and cities throughout the region are also financially stable thanks to support from the central government.

Regional liquidity is expected to remain sound, aided by its near debt-free status. Andijan is entitled to receive preferential budget loans to cover cash flow gaps. According to S&P, access to external financing is limited by the underdevelopment of the country's capital and banking sectors.

The agency may downgrade the rating if changes in the relationship between Andijan and the central government weaken regional support and lead to deterioration in its budget or debt position. A rating upgrade may be considered in the long term if the institutional environment for local and regional authorities significantly improves, becoming more predictable and transparent, and regions gain more influence over central government decisions. Improving the quality of financial management within Andijan is also necessary.