GOGC released 1H19 unaudited results. Revenue was up 17.8% y/y to US$ 160.4mn in 1H19, mostly due to a 19.8% y/y (US$ 106.7mn) increase in sale of gas. Revenue from electricity generation, second largest revenue category, was also up 21.6% y/y, while GEL-denominated gas pipelines rental revenues were down 7.1% y/y. Meanwhile, operating expenses increased 14.9% y/y to US$ 130.9mn in 1H19. Higher revenues helped adjusted EBITDA to grow by 21.7% y/y to US$ 36.5mn. Notably, more than 90% of the construction works on Gardabani II CCPP have been completed as of October 2019. GOGC’s strong financial position is attested by a one-notch rating upgrade from S&P in October 2019 to BB- outlook stable.
GOGC’s 1H19 revenue was up 17.8% y/y to US$ 160.4mn, driven by increased gas sales revenue (+19.8% y/y to US$ 106.7mn). Gas demand was mostly affected by increased demand from TPPs as well as from commercial sector. Notably, increased demand from TPPs was a result of reduced hydro generation in 1H19 (down 9.7% y/y) due to unfavorable hydrological conditions. Importantly, gas sales to commercial sector were recorded for the first time, and this new category lifted average gas sale price to US$ 126.6/mcm in 1H19 compared to 115.5/mcm in 1H18.
Gardabani TPP operated for 165 days during 1H19, compared to only 134 days in 1H18, as hydrogenation reduced. As a result, revenue from electricity generation was up 21.6% y/y to US$ 40.6mn in 1H19 (25.3% of total). Rent from gas pipelines is the only GEL-denominated revenue category for GOGC since September 2017, when an annual fixed GEL 42mn fee was introduced. Consequently, GEL’s 10% depreciation against dollar in 1H19 (vs. 1H18 average) reduced pipeline rental revenue in US-terms by 7.1% y/y to US$ 7.9mn, while in GEL terms income remained flat. Oil transportation revenue declined 15.1% to US$ 3.6mn, as crude oil throughput in WREP was down. Significant growth in revenue from crude oil sales (up 70.8% y/y to US$ 1.6mn), which makes up only 1% of total revenue, was partially driven by increased volumes (up 53.9% y/y) as well as higher global crude oil prices.
1H19 operating expenses were up 14.9% y/y to US$ 130.9mn. Cost of gas, largest expense category, which combines gas purchased for resale (85% of cost of gas) and gas used by Gardabani I, grew 19.6% y/y to US$ 114.5mn. Gas costs for resale increased in both, volume (+12.8% y/y) and price (+ 3.8% y/y) terms. As a result this category was up 16.7% y/y to US$ 97.9mn. Cost of gas used in electricity generation also grew 39.9% y/y to US$ 16.7mn as demand on gas from Gardabani I increased in the reporting period. Other expenses, accounting for 12.5% of total, decreased 9.9% y/y to US$ 16.4mn helped by GEL’s depreciation in the period.
