22 April 2004 03:58
Moody`s assigns Ba1, Ba2 ratings to Gazprom
NEW YORK. April 22 (Interfax) - Moody's Investors Service has assigned Ba1 senior implied and Ba2 issuer ratings
to Gazprom, the rating agency said in a press release on Thursday.
At the same time, Moody's has assigned a (P)Ba2 rating to Gazprom's proposed Series 2 dollar-denominated
Loan Participation Notes. The rating outlook is stable.
Moody's said that Gazprom's Ba1 senior implied rating is
underpinned by positive supports. These include its status as the
This is the first time that Moody's has assigned public ratings to Gazprom.
largest natural gas company in the world with vast reserves and a long reserve life and its 35-year track record of
supplying Western, Central and Eastern Europe with gas under committed long-term offtake contracts through varying
economic and political conditions. There is also the increasing dependence of these consumers on Gazprom's
supply.
The Ba1 rating also reflects Gazprom's very substantial importance to the Russian economy, the improvements in
the Russian macro-economic situation, the current generally benign regulatory and pricing environment, and Moody's
belief that the Russian government as the major shareholder would provide support for the company in case of need.
However, the absence of an explicit guarantee prevents the company from attaining a rating at the sovereign level.
Also taken into consideration is Gazprom's unbroken history of servicing its financial obligations, its
relatively solid and stable financial ratios and its improving resilience to lower oil prices as domestic gas prices
rise, as well as Gazprom's long record of producing IAS-compliant accounts, the international standard reserve
reports it has undertaken, and the efforts that new management is making to improve corporate governance.
The Ba2 issuer rating takes into account the subordination of the company's senior unsecured debt to a
significant amount of senior secured bank debt (both international debt backed by export receivables and domestic debt
backed by fixed asset security).
Moody's does not anticipate, and the ratings do not encompass, a restructuring of Gazprom in such a way as to
separate its upstream and downstream operations. Nor does the Ba1 rating factor in any significant external growth.
Moody's said that Gazprom's Ba1 senior implied rating reflects the company's heavy long-term
investment program to maintain and increase its natural gas production to fulfil supply contracts and restore and expand
its ageing gas transportation network. There is also the company's need for above-inflation increases in its gas
tariff to render its domestic business profitable, as well as the increasing competition that Gazprom is facing in its
important export markets and likely to face in its domestic gas supply market. The senior implied rating also reflects
the harsh and distant location of both Gazprom's mature, declining gas fields as well as those new prospects under
development, and its consequent high development and transportation costs. In addition, the rating takes account of the
Russian government's influence over Gazprom, the company's vulnerability to oil prices and exchange rates, and
the limited, albeit improving, level of disclosure and transparency which pervades Russian institutions in general. [RU
ASIA EUROPE EEU EMRG NGS AAA] me
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