Fitch Rates Russia's Khanty-Mansyisk Region 'BBB'; Outlook Stable


Link to Fitch Ratings' Report: Khanty-Mansyisk Region - RatingAction ReportLONDON/MOSCOW, October 04 (Fitch) Fitch Ratings has assignedRussia's Khanty-Mansyisk Autonomous Region (KMAR) Long-term foreign andlocal currency ratings of 'BBB', a Short-term foreign currency rating of 'F3',and a National Long-term rating of 'AAA(rus)'. The Outlooks on the Long-termratings are Stable.The rating action also affects KMAR's outstanding seniorunsecured domestic bonds of RUB2bn (ISIN RU000A0JQP51).KEY RATING DRIVERS KMAR's ratings are aligned with those of Russian Federation(BBB/Stable), reflecting the region's intrinsic strength. The ratings reflectKMAR's robust economy, its satisfactory budgetary performance, its low debtand a net cash positive status. The ratings also factor in the concentration ofthe region's tax base in the oil and gas sector. The key rating drivers andtheir relative weights are as follows:High:The region's administration expects KMAR's economy to grow about4%-5% yoy in 2013-2015. This growth is buoyed by steady output in theregion's oil and gas sector. Its strong resource-fuelled economy enables its percapita wealth indicators to significantly exceed the national average amongRussia's regions.Taxes composed 94.6% of KMAR's operating revenue in 2012 (2011:94.3%). The region's top 10 taxpayers are all Russia's major oil and gascompanies, which contributed 52.1% of total taxes in 2012 (2011: 51.5%). InFitch's view the region's economy will remain exposed to potential fiscal changesor volatile business cycles in the oil and gas sector in the medium term.Fitch expects KMAR's direct risk to remain negligible, close to3% of current revenue in 2013 and about 4%-6% in 2014-2015. Such a debt burdenis considered low by Fitch as its direct risk payback ratio is likely toremain favourable, at less than a year of the current balance in 2013-2015.KMAR is net cash positive, with accumulated cash reservesaveraging RUB17bn in 2008-2012. The region's cash reserves increased to RUB24.6bn atend-2012 (2011:RUB22.9bn). The region deposits some of its cash in commercialbanks selected on open tenders. Interest revenue earned by the region on depositsin 2012 amounted to RUB1.4bn (2011:RUB0.8bn).Medium:Fitch expects stabilisation of the region's budgetaryperformance with an operating margin at about 5%-6% in 2013-2015, underpinned bysteady output in the oil and gas sector. The region is likely to post a minordeficit before debt variation at about 1%-3% of total revenue in 2013-2015, as slowgrowth of tax revenue is countered by stable growth of opex.Fitch expects KMAR's capital outlays to stabilise at about 13%of total spending in the medium term, as its significant capex programme hasalready funded by the region in past periods. The region's self-financing capacityshould remain satisfactory with the current balance and capital revenuecovering up to 60% of total capital outlays in 2013 and close to 80% in 2014-2015.RATING SENSITIVITIES The ratings could be positively affected by a sovereign upgradeaccompanied by a budgetary performance and debt and debt coverage ratios beingwithin Fitch's base case scenario.A downgrade is unlikely unless the sovereign is downgraded.However, a downgrade could result, in the absence of a sovereign downgrade, fromsignificant deterioration in budgetary performance materially below theagency's expectations leading to weaker debt ratios.Contact: Primary AnalystKonstantin AnglichanovDirector +7 495 956 9994Fitch Ratings CIS Ltd26 Valovaya StreetMoscow 115054Secondary AnalystBehruz IsmailovAssociate Director+7 495 956 9980Committee ChairpersonGuido BachSenior Director+49 69 768076 111Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495956 9908, Email:; Peter Fitzpatrick,London, Tel: +44 20 3530 1103, Email: information is available on"> criteria, 'Tax-Supported Rating Criteria', dated 14August 2012, and 'International Local and Regional Governments Rating Criteriaoutside United States', dated 9 April 2013, are available"> Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLEON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'SCODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATEFIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLEFROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHERPERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN ANEU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUERON THE FITCH WEBSITE.

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