Fitch rates Gazprom notes BBB-

Fitch Ratings said it assigned an expected BBB- rating to Gaz Capital SA's issues of the sixth and seventh tranches under the existing $15 billion loan participation note program (rated BBB-). The bonds rely on a senior unsecured liability of Russia-based OAO Gazprom for repayment.

Gazprom's natural gas sales to Europe increased 38% in 2005, primarily due to rising prices while sales to former Soviet Union countries rose 58% on a combination of higher volumes and gas prices. The agency said the higher gas prices to former Soviet Union countries are especially supportive of Gazprom's credit ratings as the company works to align previously low prices with higher European ones.

Fitch said it expects the company will continue to raise prices for Central and Eastern European as well as former Soviet Union countries to be more closely aligned with higher Western European prices. Gazprom's margins, operating cash flow generation and leverage and interest coverage ratios continue to improve, although the interest coverage ratios remain weaker than those of its peers operating in Russia, the agency added.

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