Moody's rates Vodokanal Baa3

Moody's Investors Service said it assigned a Baa3 global scale issuer rating and an Aaa.ru national scale credit rating to SUE Vodokanal of St. Petersburg.

The outlook is stable.

The agency said the ratings reflect the company's ownership by the City of St. Petersburg; its high dependence, reflecting the fact that the company operating in water and wastewater industry has an overwhelming market share in the city and suburban areas; high support, reflecting the strategic importance of the company, the city administration's strong oversight of the company's activities and the administration's commitment to back outstanding long-term debt of the company; and the strengths of the institutional and financial framework under which Vodokanal operates.

At the same time, the ratings are constrained by a politically sensitive tariff regulation that limits the company's cash flow generation ability, its limited ability to improve collection of payments from households and state entities under a tariff increase, risks of a material increase in debt burden driven by the company's large investment needs and by a risk that the city administration reduces its funding support towards the company's investment program and exposure to a material unplanned increase in investments due to the company's highly depreciated assets, Moody's said.

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