ACRA affirms AAA(RU) to LLC Gazprom Export, outlook Stable

The credit rating of LLC Gazprom Export (hereinafter, the Company, or Gazprom Export) is due to the very high assessment of the Company’s ties to PJSC Gazprom, as well as the strong assessment of the supporting company (PJSC Gazprom – AAA(RU), outlook Stable).

Gazprom Export is the exporting entity of PJSC Gazprom. Taking into consideration the level of connection between the Company and PJSC Gazprom, ACRA believes it is rational to use only the Methodology for Analyzing Member Company Relationships Within Corporate Groups in its rating analysis of the Company, without determining the Company’s standalone creditworthiness assessment (SCA).

Key rating factors

The very high assessment of connection to the supporting organization is due to the strong legal connection between the Company and PJSC Gazprom (share in capital amounts to 100%), full operational integration, as well as the strategic importance of the Company to PJSC Gazprom. The Company is the only export channel for natural gas sales for PJSC Gazprom and its subsidiaries, with the exception of natural gas supplies to CIS and Baltic counties under contracts concluded by PJSC Gazprom. Gazprom Export owns a network of foreign sales companies (including 100% of shares in Gazprom Germania) that market and trade hydrocarbons in the European market, including gas supplies to final consumers. Gazprom Export also owns shares in underground gas storage (UGS) facilities that are strategically important to PJSC Gazprom: Dambořice (Czech Republic), Banatski Dvor (Serbia), Katharina (Germany), and via Gazprom Germania: Rehden, Etzel, Jemgum (Germany) as well as Haidach (Austria).

The Company is located in the physical cash-pooling system of PJSC Gazprom and does not carry out external borrowing. In compliance with commission agreements, PJSC reimburses the Company for expenses resulting from the execution of the commission agreements, including gas transportation and storage costs. PJSC Gazprom sufficiently ensures the maintenance of the Company’s net assets, including making property contributions if necessary.

Strong assessment of the supporting organization. PJSC Gazprom, one of the world’s largest vertically integrated energy companies, acts as the supporting organization for the Company. The credit rating assigned to PJSC Gazprom is due to the very high systemic importance of the organization to the Russian economy, as well as the very high level of state influence on the organization (according to ACRA’s methodology). PJSC Gazprom’s standalone creditworthiness is characterized by a very strong business profile, low industry risk, and a strong financial profile. PJSC Gazprom’s SCA is limited by weak free cash flow indicators due to significant capital expenses and paid dividends.

Key assumptions

  • PJSC Gazprom maintaining shareholder and operational control;
  • LLC Gazprom Export maintaining the exclusive right to export gas produced by PJSC Gazprom (with the exception of natural gas supplied to CIS and Baltic counties under contracts concluded by PJSC Gazprom).

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A negative rating action may be prompted by:

  • PJSC Gazprom’s loss of shareholder or operational control;
  • Decrease in the credit rating of PJSC Gazprom.

Rating components

SCA: none.

Adjustments: none.

Support: on par with PJSC Gazprom.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation and is based on the Methodology for Analyzing Member Company Relationships Within Corporate Groups, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.

The credit rating assigned to LLC Gazprom Export was published by ACRA for the first time on November 21, 2018. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by LLC Gazprom Export, information from publicly available sources, as well as ACRA’s own databases. The credit rating is solicited, and LLC Gazprom Export participated in its assignment.

No material discrepancies between the provided data and the data officially disclosed by LLC Gazprom Export in its financial report have been discovered.

ACRA provided no additional services to LLC Gazprom Export. No conflicts of interest were discovered in the course of credit rating assignment.

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