S&P: Russian Nuclear Equipment Leasing Company TENEX-Service Outlook Revised To Stable; 'BB/B' Ratings Affirmed
At the same time, we affirmed our 'BB/B' long - and short-term counterparty credit and 'ruAA' Russia national scale ratings on the company.
The outlook revision mirrors that on TENEX's parent, state-owned Atomic Energy Power Corp. JSC (AtomEnergoProm; see "Atomic Energy Power Corp Outlook Revised To Stable After Same Action On Russia; 'BB+/B' And 'ruAA+' Ratings Affirmed" published Sept. 22, 2016, on RatingsDirect).
TENEX is a captive leasing company of AtomEnergoProm. We view TENEX as a highly strategic subsidiary of AtomEnergoProm and therefore rate TENEX one notch below AtomEnergoProm. Although small compared with the whole group, TENEX shows very high integration with its parent. TENEX's strategy, risk management, funding, and client base are shared with, or provided by, AtomEnergoProm and it has limited business scope outside the group. In our view, TENEX is not separable from the rest of the group and the likelihood of extraordinary support from its parent, if required, is extremely high.
We view TENEX as a government-related entity (GRE), and our assessment of its limited link to the government is based on the sovereign's indirect ownership of TENEX through AtomEnergoProm. TENEX does not play a central role in meeting the Russian government's key economic and social objectives, so we consider that it has limited importance for the government. Positively, TENEX's business activities are secured by Presidential Act No. 556, which currently allows only TENEX to lease nuclear equipment in Russia; we consider this to be a form of government support. In addition, due to AtomEnergoProm's GRE status, we think that any government support would likely be extended to TENEX through AtomEnergoProm.
The stable outlook on TENEX mirrors that on its GRE parent, AtomEnergoProm, reflecting our expectation that TENEX will continue to benefit from its close strategic and operational integration with its parent.
We could downgrade TENEX if AtomEnergoProm modified its approach to favor direct purchases over leasing, which would signal a decrease of TENEX's importance to, and integration with, the AtomEnergoProm group. We might also take a negative rating action if TENEX's strategy were substantially extended beyond serving AtomEnergoProm's companies, leading to a marked weakening of its stand-alone credit profile, alongside clear evidence of diminishing parental support or more restrained parental participation in TENEX's management and supervision.
A positive rating action is unlikely over the next 18-24 months and would most probably depend on a positive rating action on the parent.