Moody's affirms Transneft

Moody's Investors Service said it affirmed the A2 local and foreign currency issuer ratings of Russia-based OAO AK Transneft following an expectant rise of absolute levels of debt associated with the build out of the East Siberia Pacific Ocean Pipeline Project.

At the same time, Moody's Interfax Rating Agency, which is majority owned by Moody's, has affirmed Aaa.ru long-term national scale credit rating of the company.

The outlook is stable.

The agency said Transneft's ratings are supported by its importance to the Russian economy and its strategic development, full state ownership and close control by the Russian government, the monopoly nature of the company's business as the leading Russian oil pipeline company and the benign tariff regulation, which enables stable and predictable revenues.

At the same time, the ratings remain constrained by considerable challenges to maintain and modernize the Russian oil transportation system and the small but growing competition from new pipelines, Moody's said. Transneft is also potentially subject to a change in strategy upon the direction of the Russian government and, though quite supportive in terms of tariff regulation, the company's regulatory environment lacks a track record of stability.

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