NEWS
Gazprom credit rating rises despite concerns
Moscow, Aug 12 (LNG journal)
- Gazprom, potentially one of the biggest players in liquefied natural gas, saw its credit rating upgraded on Friday, even as continued concern was expressed about the company's operating cash flow and its high costs.
Fitch Ratings, the international rating agency, said it gave the company a stable outlook and raised its rating to "BB+" from "BB".
This followed the completion of the government's acquisition of an additional 10.74 percent of the company's shares, bringing the total ownership stake to slightly more than 50 percent.
Gazprom is now two notches above the government itself as far as its credit rating goes, Fitch said.
"Further upgrades to Gazprom's credit ratings depend on the company's ability to demonstrate improvement in areas such as domestic pricing power and operating cost containment, which would improve cash flow generation," a Fitch statement said.
However, Fitch said it was concerned with the company's inability to demonstrate improved operating cash flow generation. Rising cash capital expenditures, which are now outstripping operating cash flow, are a concern as operating cash flow growth has not materialized to the degree expected in the current price environment.
Gazprom's business requires significant ongoing capital expenditures to maintain production and transportation systems. As a result, the company last year increased borrowings by approximately $3.5 billion.
Gazprom, which is involved in the Sakhalin projects in the Russian Far East, is seeking to boost its LNG activities to generate cash in the future.
Earlier this week, the UK-based marketing and trading arm of Gazprom said it had clinched its first LNG gas swap deal as part of its strategy to learn more about the business.
Gazprom said it closed a deal with oil major Royal Dutch Shell and BG Group of the UK for its first LNG cargo transaction for delivery to the United States .
