S&P: Mosenergo still on positive watch

Standard & Poor's said its B long-term corporate credit rating and ruA- Russia national-scale rating on Mosenergo remain on CreditWatch with positive implications, where it was placed in December following approval of share issue to OAO Gazprom (BBB with stable outlook) by Mosenergo shareholders.

The CreditWatch reflects the potential improvement in Mosenergo's creditworthiness as a result of the share issue, S&P said. Mosenergo could benefit from a strengthening of its capital structure following the equity increase and from a closer affiliation with Gazprom, which may gain a controlling stake in the company, the agency added.

The CreditWatch placement will be resolved after completion of the share issue procedure, S&P said and once the agency has more clarity regarding any potential changes to Mosenergo's strategy if there is a new controlling owner. S&P said it will assess the level of support available to the company in its potential status as Gazprom's subsidiary.

The ratings reflect an unsupportive and evolving tariff regulatory regime, the company's ambitious investment program and an aggressive financial profile, the agency said.

These weaknesses are mitigated by Mosenergo's strong competitive position in the lucrative and growing Moscow region, its diversified heat and power generation portfolio and technical limitations on competition from alternative power and heat producers.

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