'Naftogaz' is at risk of default - Fitch rating.

The international rating agency Fitch has confirmed the credit rating of NJSC 'Naftogaz of Ukraine' at 'CC', which indicates a high likelihood of default.

According to the agency's assessment, 'Naftogaz' has moderate ties with the state, allowing for an autonomous evaluation of the company, hence its rating is higher than Ukraine's sovereign rating ('RD').

Fitch also confirmed the rating of 'Naftogaz's' eurobonds at 'C'. The recovery rating ('Recovery Rating') remains at 'RR6', as the company has made timely and full payments on the restructured eurobonds in 2023.

The main factors influencing the company's position are the preservation of infrastructure, stable growth in production, and improved financial indicators, particularly cash flow from operating activities.

Fitch also notes that high operational risks significantly affect the rating, such as the war with Russia, halting gas transit, non-payments for gas supplies, and limited external financing opportunities.

Moreover, Fitch stated that the state does not compensate 'Naftogaz' for fulfilling special obligations during the war. Management continues to work with the government to obtain compensation and resolve the tariff difference in 2024.