OREANDA-NEWS. Fitch Ratings has affirmed JSC Atomic Energy Power Corporation's (Atomenergoprom) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB'. The Outlook on the Long-term IDR is Negative.

Atomenergoprom's 'BBB' ratings benefit from state support and continue to be aligned with those of the Russian Federation (BBB/Negative), its ultimate shareholder.

Fitch assess Atomenergoprom's standalone profile at 'BB+'. The group's sound financial profile, full vertical integration, large order book, operations under long-term contracts, strong market positions globally, limited volume risk in electricity sales and nuclear generation capacity expansion under the capacity supply agreements (CSAs) with long-term guaranteed payments exhibit the characteristics of a solid investment grade company. However, the unpredictability of the Russian regulatory framework in the power markets constrains its standalone profile to sub-investment grade.

Atomenergoprom's ratings incorporate state support and are aligned with those of the Russian Federation as Fitch considers the strategic, operational and to a lesser extent legal ties between Atomenergoprom and its 100% direct parent State Atomic Energy Corporation Rosatom and ultimately the state as strong, in accordance with Fitch's Parent and Subsidiarity Rating Linkage methodology. Rosatom, a former Russian Ministry for Atomic Energy, is in turn 100%-state owned.

The strength of the links is underpinned by Atomenergoprom's strategic importance for the implementation of the state programme for the development of the Russian nuclear civil segment, track record of tangible financial support from the state, centralised treasury at Rosatom's level and the fact that Atomenergoprom's board of directors consists fully of Rosatom's representatives. As part of state support, Atomenergoprom received equity injections of RUB289bn (USD8.5bn) over 2010-2013 and expects to receive RUB300bn (USD8.8bn) over 2014-2018.

Atomenergoprom outperformed our financial forecasts for 2013 with funds from operations (FFO) gross adjusted leverage remaining below 2x at 1.75x and FFO fixed charge cover of 7.5x well above the forecast 6x. This was driven by stronger than expected performance of the generation segment due to the life extension of several units, which were initially scheduled to be in maintenance, as well as higher volumes in trading and fuel divisions.

Negative: Future developments that could lead to negative rating action include:
- A negative rating action on the sovereign would be replicated on Atomenergoprom.
- Deterioration of the financial profile (e.g. FFO gross adjusted leverage above 3x and FFO fixed charge coverage below 4x) on a sustained basis may be negative for the standalone profile, but ratings may continue to be supported by the parent and ultimately the state. However, the company's ratings may be adversely affected if the credit metrics deterioration is perceived as a sign of diminishing state support.

Positive: Future developments that could lead to positive rating actions include:
- A revision of the Outlook on the sovereign to Stable would be replicated on Atomenergoprom.
-Further positive sovereign rating action, if there are more robust legal ties between Atomenergoprom and its ultimate parent - the state (e.g. financial guarantees for a large portion of debt; cross default provisions), would lead to the continuous alignment of its ratings with the sovereign's ratings. However, a positive sovereign rating action is unlikely to be replicated for Atomenergoprom at its current rating level (except for the Outlook revision) if the strength of the links with the parent and ultimately the state remains unchanged.
- Enhancement of the business profile through geographic diversification and/or operational diversification reducing the contribution of the Russian power generation to EBITDA to well below 50% would be positive for the group's standalone profile but are unlikely to change the rating while it remains state supported.
- FFO gross adjusted leverage below 2x and FFO fixed charge cover above 6x on a sustained basis would improve Atomenergoprom's standalone creditworthiness, but not necessarily its ratings.