S&P upgrades Mosenergo

S&P said it raised its long-term corporate credit rating on Mosenergo (AO) to BB+ from BB. The outlook is negative.

At the same time, S&P raised its Russia national scale rating on the company to ruAA+ from ruAA.

S&P said the upgrade reflects that Mosenergo is close to finishing its investment program and will therefore have lower and more flexible capital expenditures (capex) from 2016. Consequently, S&P anticipates the company will generate positive free operating cash flow, allowing it to consistently maintain moderate leverage, namely with funds from operations (FFO) to debt of 35%-45%.

The rating also factors in S&P’s expectation of resilient operating performance, due to the lucrative service area, despite Russia’s now weaker macroeconomic environment and supply-demand balance in its electricity market, the agency noted.

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