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RAO UES of Russia Lifted To 'BB/ruAA' On Restructuring Progress; Outlook Stable

February 2, 2007
MOSCOW (Standard & Poor's) Feb. 2, 2007--Standard & Poor's Ratings Services said today that it raised its long-term corporate credit rating to 'BB' from 'B+' on RAO UES of Russia, the holding company of the RAO UES energy group, which is 52.7%-owned by the Russian Federation (foreign currency BBB+/Stable/A-2; local currency A-/Stable/A-2; Russia national scale 'ruAAA'). At the same time, the Russia national scale rating was raised to 'ruAA' from 'ruA+'. The outlook is stable.
"The upgrade reflects the continuing progress in the RAO UES energy group restructuring, better clarity regarding the holding company's restructuring plan, and strengthened government support for the group," said Standard & Poor's credit analyst Eugene Korovin.
We believe that the government's commitment to completing the sector's restructuring in 2008 has strengthened on the back of growing power demand and concerns for a secure power supply, which require heavy investment in the medium term.
We expect that the energy group's restructuring will be completed in the next two years, and that RAO UES will then cease to exist, at which time the ratings on RAO UES will be withdrawn.
"A revision to the group's restructuring plan, involving, for example, the order and timing of ownership unbundling of successor entities, would substantially affect RAO UES energy group's credit quality, and could result in a rating change," added Mr. Korovin.
If a nonliquidation scenario is approved, the rating could be raised or lowered to reflect the postrestructuring credit quality of RAO UES, which will primarily depend on the credit quality of the successor entities remaining under its control.
Unexpected aggressive borrowing resulting from failure to obtain necessary funding from nondebt external financing or acquisitions could put pressure on the rating.

Company — RAO UESR
  • Full name
    Open Joint Stock Company RAO UES of Russia
  • Registration country
  • Industry