Moody’s upgrades Company’s corporate family rating and probability of default rating

08 December 2017

On Dec. 07, 2017 Moody’s Investor Service has upgraded the corporate family rating (CFR) and probability of default rating (PDR) of IDGC of Urals to Ba1 from Ba2 and to Ba1-PD from Ba2-PD, respectively (Stable outlook).

The upgrade reflect Moody's opinion that (1) the regulatory environment for the Russian energy grids, albeit still evolving, provides for a timely recovery of operating costs, a somewhat deferred but guaranteed recovery of investments into infrastructure and an adequate return on such investments; (2) electricity distribution volume risks are limited in the future, given the company’s dominant market position; (3) company’s financial profile has recovered and is strong for the current rating category; and (4) company’s liquidity is robust.

Positive pressure on the ratings and the outlook could arise if the government bond rating of Russia were upgraded, provided that (1) there is a clear evidence that the regulatory regime for the sector is evolving in the positive direction, providing for robust and predictable long-term recovery of costs and investments; and (2) the company maintains strong credit profile and robust liquidity in line with Moody's expectations. Continued evidence of state support for the sector, as well as company’s disclosure standards, would also be prerequisites for a higher rating.

Conversely, (1) negative developments in the regulatory environment for the sector pressuring the company’s ability to recover costs and investment, and/or providing for a lower transparency into the company’s future cash flow generating capacity, or (2) FFO interest coverage and FFO/net debt falling materially and persistently below 4.0x and mid-twenties, respectively, or (3) downward reassessment of government support for the sector, or (4) liquidity constraints, could exert negative pressure on the ratings.

Please, visit official web-site www.moodys.com for additional disclosures.

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