The credit rating of Mosoblenergo JSC (hereinafter, Mosoblenergo, or the Company) is based on the Company’s strong market position in its region of presence, strong operational risk profile, very high business profitability, and good level of liquidity. The rating is constrained by the medium size of the business, as well as the medium free cash flow (FCF) coupled with substantial investments. At the same time, the rating reflects a high degree of support from the Moscow Region (ACRA rating AAA(RU), outlook Stable, hereinafter, the Moscow Region, or the Region), as well as a medium dependence of Mosoblenergo and the Region on homogenous risk factors.
Mosoblenergo is a regional power grid company operating in the Moscow Region. The sole shareholder of the Company is the Moscow Region represented by the Ministry of Property Relations of the Moscow Region.
key assessment factors
High degree of support for the Company by the Moscow Region. Mosoblenergo is the second largest power grid operator in the Region, which is consolidating the electric grid facilities owned by the Region. The Company services around 93% of the Region’s population, which determines its high systemic importance and reflects the exclusivity of its functions for the Region, which is mainly expressed in the supply of electricity to the population and households. In ACRA’s opinion, if necessary, it is highly likely that the Company will receive extraordinary financial support from the Region. The presence of a significant strategic and operational control over the Company is due to the Moscow Region exercising shareholder control over Mosoblenergo. The Deputy Minister of Energy of the Moscow Region is the chairman of the Company’s board of directors. The Region determines the Company’s strategic development, investment plans and dividend policy, and also influences its operations and financial activities by setting tariffs and replenishing the Company’s authorized capital via property contributions. At the same time, the Company enjoys a certain degree of freedom in carrying out the operational objectives set by its shareholder. Most of the Company’s decisions have to be approved by its board of directors.
Infrastructure monopoly with low sales risk. Mosoblenergo holds a key position in the electricity transmission market within the boundaries of connected networks in the serviced area. In terms of the volume of services provided for the transmission of electric energy to end users, the Company’s market share in the Moscow Region is about 25%. The Company’s overdue accounts receivable are low.
Strong operational risk profile. The degree of economic development of the Moscow Region creates conditions that allow tariffs to be set at a level that ensures sufficient business profitability of the Company and reduces the risk of sociopolitical factors influencing tariff decisions. The size of tariffs provides the Company with FFO before net interest and taxes margin at about 30%. According to ACRA’s projections, the FFO before net interest and taxes margin will be 33–34% in 2025–2026. The wear and tear of the Company’s fixed assets is low. Mosoblenergo’s investment activity is high (23.5% of revenues) and aimed at both ensuring high quality and reliable supply of electricity to consumers and broadening its operations. ACRA assesses the Company’s corporate governance as compliant with industry standards. The board of directors includes the Deputy Minister of Energy of the Moscow Region, the First Deputy Minister of Property Relations of the Moscow Region, advisors of the Governor and Vice-Governor of the Moscow Region. Mosoblenergo’s risk management system is aimed at minimizing the main types of risk. The Company’s financial transparency is high.
Leverage and coverage. As of October 1, 2024, the Company’s debt portfolio amounted to RUB 10.2 bln; it was entirely denominated in rubles and included fixed-rate loans and a RUB 3.5 bln floating-rate bond issue. The debt is slightly concentrated on a single creditor. The ratio of total debt to FFO before net interest in 2023 was 0.7x. In April 2024, Mosoblenergo issued certain paid guarantees for a total of RUB 22.2 bln in favor of companies outside the perimeter of its consolidation. ACRA includes these guarantees into the total debt of the Company starting from their effective date, so that the weighted average ratio of FFO before net interest for the period from 2024 to 2026 is 2.8x.
The debt coverage ratio (FFO before net interest to interest) was 11.2x as of the end of 2023. The Agency forecasts that the Company’s leverage will decline in 2024–2026 due to an increase in the weighted average borrowing costs up to 8.2x.
A good access to external liquidity sources stems from the undrawn open credit lines at banks. Moreover, this year the Company placed its first bond issue.
Medium FCF. The Company’s FCF was positive (about RUB 0.8–0.9 bln) in 2021–2023, and ACRA expects it to remain at around current positive values in 2024–2025.
key assumptions
-
Implementation of the major development program according to plan.
-
Dividend payments in 2025–2026 as announced.
potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
-
The ratio of total debt, including guarantees, to FFO before net interest falling below 1.0x;
-
Higher importance of the Company for the Moscow Region through inclusion of cross-default provisions in the Region’s debt obligations.
A negative rating action may be prompted by:
-
Loss of control by the Moscow Region or a loosening of ties between the Company and the Region;
-
FFO before net interest and taxes falling below RUB 5 bln coupled with the FFO before net interest and taxes margin falling below 15%;
-
Coverage (FFO before net interest to interest) falling below 5.0x.
rating components
Standalone creditworthiness assessment (SCA): аa-.
Support: Russian region.
issue ratings
Bond of Mosoblenergo, series 001Р-01 (RU000A1099E4), maturity date: July 25, 2029, offer date: August 9, 2027, issue volume: RUB 3.5 bln — АA+(RU).
Credit rating rationale. The issue is a senior unsecured debt instrument of the Company. Due to the absence of either structural or contractual subordination of the issue, ACRA regards it as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. In accordance with ACRA’s methodology, the simplified approach was used, according to which the credit rating of the issue is equivalent to the credit rating of Mosoblenergo JSC.
regulatory disclosure
The credit ratings have been assigned to Mosoblenergo JSC and the series 001P-01 bond issue (RU000A1099E4) of Mosoblenergo JSC under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation, Methodology for Assigning Credit Rating with External Support, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale of the Russian Federation was also applied to assign a credit rating to the abovementioned bond issue.
The credit ratings of Mosoblenergo JSC and the series 001P-01 bond issue (RU000A1099E4) of Mosoblenergo JSC were published by ACRA for the first time on December 9, 2022, and August 20, 2024, respectively. The credit rating of Mosoblenergo JSC and its outlook and the credit rating of the series 001P-01 bond issue (RU000A1099E4) of Mosoblenergo JSC are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by Mosoblenergo JSC, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited and Mosoblenergo JSC participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to Mosoblenergo JSC. No conflicts of interest were discovered in the course of credit rating assignment.
