The credit rating of PJSC YATEC (hereinafter, the Company, YATEC) is based on the Company's very strong market position, very strong business profile, high profitability, low leverage, and strong liquidity assessment. At the same time, the very low availability and diversification of sales markets, production concentration on a single gas field, small size of the Company, and low coverage have a constraining effect on the rating.
YATEC is a non-state gas company, which natural gas reserves exceed 582 bcm and natural gas resources are about 611 bcm. The Company's share of gas produced in the Republic of Sakha (Yakutia) (hereinafter, Yakutia) is 86%. The Company holds rights for eight license areas: Srednevilyuiskoe, Mastakhskoe, Tolonskoe, Tymtaydakhskoe, Severnoye, Yuzhnoye, Mayskoye, and Sobolokhskoe.
Key assessment factors
Very strong assessments of market position and business profile. YATEC, which occupies 86% of the regional natural gas production market, is the only company supplying gas to the central regions of Yakutia and the city of Yakutsk. Moreover, the Company is the only manufacturer of motor fuel in Yakutia. The very strong business profile of the Company is due to the very low production costs and very high adequacy of the resource base (over 200 years of production at the current pace).
The very weak assessment of geographical diversification is due to the very low availability of sales markets and the concentration of production on a single gas field. Yakutia is the Company’s only natural gas sales market. The Company also supplies its products, including gas condensate, liquefied hydrocarbon gas, and motor fuel, to the Republic of Sakha (Yakutia), Sakhalin Region, Primorsky Krai, Khabarovsk Krai, Amur Region, Irkutsk Region, Novosibirsk Region, Zabaykalsky Krai, the Republic of Buryatia, the Republic of Khakassia, Kemerovo Region, Altai Krai, and Jewish Autonomous Region. These products are also exported to Mongolia.
Low leverage and low coverage. According to ACRA's estimates for 2020–2025, the weighted average ratio of total debt to FFO before net interest payments is expected at 3.1x. According to the Agency's estimates, the ratio of weighted average FFO before net interest payments to interest payments for the period 2019–2024 is expected at 3.3x. The Agency expects that the Company's projects will be funded without any additional debt financing.
Strong liquidity. A peak of capital expenses expected in 2023–2024 has a significant impact on the assessment of cash flows. The Company’s FCF is expected to become negative in this period. At the same time, the liquidity assessment takes into account the expected inflow of equity, which may become a funding source for the Company's investment program.. A significant portion of capital expenses will be spent on the development program, which, in turn, may be delayed in case of need.
Key assumptions
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The Company's annual gas production volume at 1.8 bcm in 2023–2025.
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The Company's development program to be funded without an increase in leverage.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- The weighted average ratio of adjusted total debt to FFO before net interest declining below 2х, and the weighted average ratio of FFO before net interest to interest growing above 10х.
A negative rating action may be prompted by:
- An increase in the weighted average ratio of total debt to FFO before net interest above 3.5х.
Rating components
SCA: a.
Adjustments: none.
Issue ratings
PJSC YATEC (ISIN RU000A102B48), maturity date: October 31, 2023, issue volume: RUB 4 bln — A(RU).
PJSC YATEC (ISIN RU000A102ZH2), maturity date: April 07, 2025, issue volume: RUB 5 bln — A(RU).
Rationale. The issues represent senior unsecured debt of PJSC YATEC. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. According to ACRA’s methodology, the recovery rate on the unsecured debt belongs to category I, therefore, the credit ratings of the issues are equivalent to that of the Company, i.e. A(RU).
Regulatory disclosure
The credit ratings of PJSC YATEC and the bonds issued by PJSC YATEC (ISIN RU000A102B48, RU000A102ZH2) have been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for 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 Financial Instruments on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of PJSC YATEC and the bonds issued by PJSC YATEC (ISIN RU000A102B48, RU000A102ZH2) were published by ACRA for the first time on April 30, 2020, November 3, 2020, and April 12, 2021, respectively. The credit rating of PJSC YATEC and its outlook, as well as the credit ratings of the bonds issued by PJSC YATEC, are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by PJSC YATEC, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited, and PJSC YATEC participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no ancillary services to PJSC YATEC. No conflicts of interest were identified in the course of credit rating assignment.
