S&P places Moscow Integrated Power Co BB rating on CreditWatch neg
LONDON. Dec 7 (Interfax) - Standard & Poor's placed its 'BB' long-term corporate credit rating and 'ruAA' Russia national scale rating on Russian heating utility Moscow Integrated Power Co. JSC (MIPC) on CreditWatch with negative implications, the agency said in a press release.
At the same time, we affirmed our 'B' short-term corporate credit rating on the company.
"The Credit Watch placement follows reports that Russian electricity and heat generator Mosenergo (AO), and its ultimate parent OAO Gazprom (BBB-/Stable/A-2), are in negotiations with the City of Moscow (BBB/Stable/--), the 89.98% owner of MIPC, to acquire a stake in MIPC. In our view, the transaction could weaken the likelihood that Moscow would lend financial support to MIPC if needed," S&P said.
"Under our criteria, we consider MIPC to be a government-related entity (GRE). We currently believe there is a "high" likelihood Moscow would provide timely and sufficient extraordinary financial support to MIPC, based on the company's "important" role for and "very strong" link to the city's government, which results in a three-notch uplift from the company's SACP.
We understand that it's unclear at this stage whether the transaction will go through, owing to uncertainties regarding its timing, price, sources of funding, and the offered stake in MIPC. Still, the transaction could signal MIPC's weakening role for or link to Moscow. If the full or partial disposal of the stake in MIPC goes through, we would likely reduce or remove the uplift we currently incorporate into the rating on MIPC for extraordinary government support, which could lead us to downgrade MIPC potentially by one to three notches. This would, however, also depend on our view of Mosenergo's credit quality and willingness to support MIPC.
MIPC is the dominant player in the local heating market; it controls almost all of Moscow's district heating grids.
We intend to resolve the CreditWatch placement once there is more clarity on whether the transaction will proceed, and if it does, its timing, financing structure, price, and the size of the offered stake in MIPC.
We could downgrade MIPC if we believe Moscow would dispose of a partial or full stake in MIPC. Depending on the size of the privatized stake and whether the city would continue providing financial support to MIPC, we might revise our assessment of the likelihood of extraordinary government support. This could lead us to reduce or remove the notches of uplift we currently incorporate into the ratings on MIPC for government support. In turn, this could result in a downgrade of MIPC by one, two, or a maximum of three notches. However, this would also depend on our view of Mosenergo's credit quality and willingness to support MIPC.
Should the transaction go through, we will also assess its impact on MIPC's market position, profitability, strategies, and funding. This could lead us to revise our assessment of the company's SACP.
We will review our assessment of extraordinary support regardless of whether the transaction takes place.
We could affirm the rating if the transaction doesn't go through, and if the city demonstrates its willingness to maintain its control over and provide financial support to MIPC," S&P said.