S&P: Russian Regional Water Utility Mosvodokanal Outlook Revised To Stable; 'BB+/B' And 'ruAA+' Ratings Affirmed
The rating action on Mosvodokanal follows a similar rating action on the city of Moscow. In our view, there is a very high likelihood that the city government would provide timely and sufficient extraordinary support to Mosvodokanal in the event of financial distress. We continue to assess Mosvodokanal's stand-alone credit profile (SACP) at 'bb+'.
The stable outlook reflects that on the long-term rating on the City of Moscow. It also reflects our belief that financial risks associated with Mosvodokanal's ambitious investment program will continue to be mitigated by the utility's monopoly position in the city and strong ongoing support from the City of Moscow, including regular equity injections and co-financing of capital expenditures.
We could lower the long-term rating on Mosvodokanal if we lowered the long-term rating on Moscow by one notch, all else being equal.
We could also lower the rating on Mosvodokanal if we revised down our assessment of the utility's SACP by one notch. This might result from aggressive debt accumulation and weak financial and operational results, leading to the debt-to-EBITDA ratio rising above 2.5x and the funds from operations (FFO)-to-debt ratio falling below 45% without a credible plan for recovery in the next six-12 months. Downward pressure might also stem from deteriorating liquidity and maturity profiles.
A positive rating action on the city of Moscow might create upside potential for the rating on Mosvodokanal, all else being equal.