Fitch has confirmed the likely default of the Ukrainian energy company.

The Fitch Ratings agency confirmed the long-term default rating for the NEC Ukrenergo electricity system company at the CC level (probable default) and the priority unsecured rating of its $825M in state-guaranteed Eurobonds at the CC level with a recovery rating of RR4.

The agency believes that electricity consumption in Ukraine will recover somewhat in 2023 and further in 2024 compared to 2022. At the same time, it will remain much lower than the pre-war level, limiting Ukrenergo’s electricity transmission income, network maintenance and reconstruction, and implementation of its development projects to improve interregional communication and interconnectors with EU countries.

Capital investments are expected to double in 2023 and 2024 compared to a low average of UAH 1.8B in 2020-2022. Fitch draws attention to Ukrenergo’s responsible for maintaining and restoring the country’s power grid during the war, which absorbs the company’s available resources and complicates their liquidity issue.