The credit rating of the Yamalo-Nenets Autonomous Okrug (hereinafter, the Region) is based on its minimal debt load, high self-sufficiency, sustainability and liquidity of the budget, and high performance indicators of the regional economy.

A standalone administrative entity of the Russian Federation, the Region is also part of the Tyumen Regionand is located in the Ural Federal District. The Region is a Far North territory with more than half of its area lying beyond the Arctic Circle. More than 80% of Russian gas is extracted in the region. In 2020, the Region’s nominal GRP was RUB 2.8 tln. The Region’s population accounts for about 0.4% of the Russian population.


A certain share of profit tax revenues collected in the Region goes to the budget of the Tyumen Region (set to 29.5% by the agreement between the Tyumen Region and the Yamalo-Nenets Autonomous Okrug).

KEY ASSESSMENT FACTORS

High budget self-sufficiency. According to the Region’s assessments, its tax and non-tax revenues (TNTR) will increase by 19% this year compared to 2020 and practically return to the record level of 2019. The main growth in tax revenues is expected to be contributed by profit tax (by 55%). In 8M 2021, profit tax revenues have already increased by 50%, and TNTR has increased by 18% overall.

Transfers in 2021 will be 38% higher than in 2020 due to an increase in subsidies and other interbudgetary transfers. Total expenditure growth in 2021 is expected to be 11%, which will lead to a budget deficit of 10% of expected TNTR. The deficit will be financed using accumulated liquidity.

The Region has a high share of internal revenues in its revenue structure: the averaged2 share of TNTR in the Region’s total revenues (excluding subventions) in the period from 2018 to 2022 will amount to 93%. TNTR is dominated by property tax (more than 35% on average for the past five years) and profit tax (more than 35%).

The regional budget’s operating efficiency is high, as the average ratio of the current operating balance to current revenues continues to be sustainably positive and will amount to 19.2% for 2018–2022. However, the ratio of the averaged modified budget deficit to current revenues has been negative since 2020, and due to this, the Region is using accumulated cash (or it can attract debt financing) to finance capital expenditures. Current expenditures of the Region are fully covered by budget revenues.

The regional budget is highly flexible due to the high average share of capital expenditures in total expenditures, which will be 29% in 2018–2022. More than 90% of capital expenditures are covered by the Region on its own.


2 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.

Minimal debt load. As of the end of this year, the ratio of debt to current revenues is expected to be less than 2%. Debt will be entirely made up of bonds and the refinancing risk is minimal.

The share of short-term debt is insignificant given the Region’s minimal debt load. This is why the Region does not take part in restructuring its commercial debt.

Public debt servicing costs are not burdensome for the budget: the ratio of average interest expenses in 2018–2022 to the average total budget expenditures excluding subventions will amount to 0.8%.

High budget liquidity. The Region has a significant amount of funds held in budget accounts and deposits. As of September 1, 2021, these funds were approximately six times higher than the total debt and almost three times higher than the average monthly budget expenditures for 8M 2021. The Region regularly places funds in deposits.

Due to its significant liquidity supply, the Region does not borrow from the Federal Treasury Department to cover cash gaps.

The Region is a contributor to the federal budget, accounting for more than 80% of Russia’s natural gas output. The Region’s economic profile assessment is determined by the high GRP per capita: in 2019, the Region ranked second among Russian regions; in 2016–2019, the averaged GRP per capita was 8.9 times higher than the average value for the national economy.

In 2016–2020, the ratio of the averaged wage to the average regional subsistence minimum grew steadily from 5x to 6.1x, and the unemployment rate estimated as per the ILO’s methodology was lower than the national average and amounted to 2.4%.

The Region’s economy is centered on the extraction and sale of hydrocarbons, which generates up to 50% of tax revenues.

The Region is one of the core contributors to the federal budget. For 2020, 82% of taxes and charges collected in the Region was transferred to the federal budget with just 18% remaining in the consolidated budget of the Region. In the same period, the Region’s contribution to the Russian budget from mineral extraction tax amounted to 19% (second among Russian regions).

KEY ASSUMPTIONS

  • Maintaining high socioeconomic indicators;

  • TNTR growing by 19% in 2021 compared to 2020;

  • Lower budget expenditures if TNTR declines;

  • Use of funds held in budget accounts, along with long-term financial instruments, to cover budget deficits.

POTENTIAL OUTLOOK OR RATING CHANGE FACTORS

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A negative rating action may be prompted by:

  • Level of liquidity consistently declining to the volume of monthly expenditures;

  • Current revenues declining significantly, with expenditures standing still;

  • A significant change in inter-budgetary relations in Russia.

ISSUE RATINGS

YaNAO, 35004 (ISIN RU000A0ZYM47), maturity date: December 25, 2024, issue volume: RUB 5.5 bln — ААА(RU).

YaNAO, 35003 (ISIN RU000A0ZYD55), maturity date: October 18, 2022, issue volume: RUB 1 bln — ААА(RU).

YaNAO, 35002 (ISIN RU000A0JX0Z8), maturity date: December 6, 2023, issue volume: RUB 20 bln — ААА(RU).

Rationale. In ACRA’s opinion, the bonds issued by the Yamalo-Nenets Autonomous Okrug are senior unsecured debt instruments, and their credit ratings are equal to the rating assigned to the Yamalo-Nenets Autonomous Okrug.

REGULATORY DISCLOSURE

The credit ratings have been assigned to the Yamalo-Nenets Autonomous Okrug and the bonds issued by the Yamalo-Nenets Autonomous Okrug (ISIN RU000A0ZYM47, RU000A0ZYD55, RU000A0JX0Z8) under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.

The credit ratings of the Yamalo-Nenets Autonomous Okrug and the government securities (ISIN RU000A0ZYM47, RU000A0ZYD55, RU000A0JX0Z8) issued by the Yamalo-Nenets Autonomous Okrug were published by ACRA for the first time on June 27, 2018. The credit rating of the Yamalo-Nenets Autonomous Okrug and its outlook and the credit ratings of its bond issues (ISIN RU000A0ZYM47, RU000A0ZYD55, RU000A0JX0Z8) are expected to be revised within 182 days following the publication date of this press release as per the Calendar of sovereign credit rating revisions and publications.

The credit ratings were assigned based on data provided by the Yamalo-Nenets Autonomous Okrug, information from publicly available sources (the Ministry of Finance, the Federal State Statistics Service, and the Federal Tax Service), and ACRA’s own databases. The credit ratings are solicited, and the Government of the Yamalo-Nenets Autonomous Okrug participated in their assignment.

In assigning the credit ratings, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to the Government of the Yamalo-Nenets Autonomous Okrug. No conflicts of interest were discovered in the course of credit rating assignment.

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