Link to Fitch Ratings' Report: Khanty-Mansyisk Region - Rating
Action ReportLONDON/MOSCOW, October 04 (Fitch) Fitch Ratings has assigned
Khanty-Mansyisk Autonomous Region (KMAR) Long-term foreign and
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-term
The rating action also affects KMAR's outstanding senior
bonds of RUB2bn (ISIN RU000A0JQP51).
KEY RATING DRIVERS
KMAR's ratings are aligned with those of Russian Federation
reflecting the region's intrinsic strength. The ratings reflect
economy, its satisfactory budgetary performance, its low debt
and a net cash
positive status. The ratings also factor in the concentration of
tax base in the oil and gas sector. The key rating drivers and
weights are as follows:
The region's administration expects KMAR's economy to grow about
4%-5% yoy in
2013-2015. This growth is buoyed by steady output in the
region's oil and gas
sector. Its strong resource-fuelled economy enables its per
indicators to significantly exceed the national average among
Taxes composed 94.6% of KMAR's operating revenue in 2012 (2011:
region's top 10 taxpayers are all Russia's major oil and gas
contributed 52.1% of total taxes in 2012 (2011: 51.5%). In
Fitch's view the
region's economy will remain exposed to potential fiscal changes
business cycles in the oil and gas sector in the medium term.
Fitch expects KMAR's direct risk to remain negligible, close to
3% of current
revenue in 2013 and about 4%-6% in 2014-2015. Such a debt burden
low by Fitch as its direct risk payback ratio is likely to
remain favourable, at
less than a year of the current balance in 2013-2015.
KMAR is net cash positive, with accumulated cash reserves
averaging RUB17bn in
2008-2012. The region's cash reserves increased to RUB24.6bn at
RUB22.9bn). The region deposits some of its cash in commercial
banks selected on
open tenders. Interest revenue earned by the region on deposits
in 2012 amounted
to RUB1.4bn (2011: RUB0.8bn).
Fitch expects stabilisation of the region's budgetary
performance with an
operating margin at about 5%-6% in 2013-2015, underpinned by
steady output in
the oil and gas sector. The region is likely to post a minor
deficit before debt
variation at about 1%-3% of total revenue in 2013-2015, as slow
growth 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 has
already funded by the
region in past periods. The region's self-financing capacity
satisfactory with the current balance and capital revenue
covering up to 60% of
total capital outlays in 2013 and close to 80% in 2014-2015.
The ratings could be positively affected by a sovereign upgrade
accompanied by a
budgetary performance and debt and debt coverage ratios being
base case scenario.
A downgrade is unlikely unless the sovereign is downgraded.
However, a downgrade
could result, in the absence of a sovereign downgrade, from
deterioration in budgetary performance materially below the
expectations leading to weaker debt ratios.
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Additional information is available on www.fitchratings.com.
Applicable criteria, 'Tax-Supported Rating Criteria', dated 14
August 2012, and
'International Local and Regional Governments Rating Criteria
States', dated 9 April 2013, are available on
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