Moody's rates Omsk Vodokanal Caa1

Moody's Investors Service said it assigned a Caa1 global scale corporate family rating and a Ba3.ru long-term national scale rating to Russia-based JSC Omsk Vodokanal. The outlook is stable.

The ratings reflect Vodokanal's operating environment in the regulated water industry, which benefits from relatively low cyclicality and growing demand; its monopolistic position in providing its services in the city of Omsk in a large and rather rapidly developing region; its management by Eurasian Water Partnership Ltd., a private entity engaged in restructuring a few Russian regional water utilities; and Vodokanal's projected acceptable financial profile, the agency said.

The ratings are constrained by Vodokanal's position as a small start-up company, the new Russian regulatory and legal framework for water and wastewater utilities, Russia's vulnerable economic, regulatory and legal environment, a limited ability to improve collection of payments from households under a tariff increase, the implementation risk associated with Vodokanal's investment program driven by the lack of know-how and technical expertise, low shareholder transparency, the lack of a defined dividend policy, uncertainties surrounding further equity contributions and lack of ownership of key assets, the agency said.

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