The credit rating of JSC AEP (hereinafter, AEP or the Company) has been affirmed on par with the financial obligations of the Government of the Russian Federation, which reflects the very high degree of support from the state and the high dependence on homogeneous risk factors. The Company’s standalone creditworthiness assessment (SCA) is a+ based on the very strong assessments of the business and market position, very high geographic diversification, and strong corporate governance, as well as the very large size of business and very high profitability. The Company’s SCA is limited by low coverage, medium leverage, medium liquidity, and very low free cash flow (FCF) indicators.
AEP consolidates the majority of civil assets of ROSATOM State Atomic Energy Corporation (ACRA rating: AAA(RU), outlook Stable; hereinafter, the Corporation). AEP is a multi-industry holding company that owns assets and competencies in all areas of the nuclear energy sector: geological exploration; extraction, enrichment and conversion of uranium; fabrication of nuclear fuel; power engineering; design and construction of nuclear power plants (NPPs); electric power generation, including from renewable sources; decommissioning of nuclear facilities; and management of radioactive waste and spent nuclear fuel. AEP includes more than 280 enterprises and organizations of the nuclear power industry. The Company is fully controlled by the state via the Corporation.
KEY ASSESSMENT FACTORS
The very high degree of state support is determined by very high assessments of the sub-factors Barriers and Restrictions, Exclusivity of Functions, Ownership, Control and Regulation, and Role in the Economy and Reputational Risks. At the same time, support sub-factors, including Social Role and Guarantees or Other Channels of Support, received high scores.
The Company’s business is not associated with any legal, economic or other barriers to the provision of state support. The Company is strategically important for the national economy. As of the end of 2024, the staff of the Company and its subsidiaries amounted to 227,900 employees. Personnel costs equaled RUB 524.0 bln in 2024. The Company pays special attention to social matters (support programs for young professionals, assistance in home purchase and rent, etc.), which contributes to social stability in a number of regions and explains the important social role of AEP for the country’s economy.
The state supports AEP and its subsidiaries in the following ways: participation in state programs; co-financing of foreign NPP construction projects; participation of state-owned funds in projects of organizations from the Russian nuclear industry; support for export projects through state loans to customer countries; subsidies; government coverage of a significant share of NPP decommissioning costs; favorable regulatory system, tax benefits, subsidized loans, etc.
ACRA assesses the dependence of the Company and the state on homogeneous risk factors as high due to the high correlation between the political, economic and financial risks of the Company and the state.
The Company’s credit rating takes into account very strong scores for the business, geographic diversification, and market position, as well as the strong assessment of corporate governance. The Agency notes the very low price and sales risks, extremely low supplier risks, and high quality of fixed assets.
Price and sales risks are very low since price volatility in the Russian wholesale electricity market is insignificant, while electricity generated at NPPs has consumption priority within the Unified Energy System of Russia (UESR). The Company builds all its power units under long-term capacity supply agreements, which also contributes to the stability and predictability of cash flows. The segment of fuel sales for NPPs is also characterized by very low price and sales risks, since these sales are carried out under long-term supply contracts.
Supplier risks are extremely low since the Company is a vertically integrated entity that includes enterprises related to the extraction, production, enrichment and sale of fuel, as well as the engineering segment, transport infrastructure, etc. Relations have been established with all external suppliers based on long-term contracts for the supply of components.
Due to regular investments in upgrading existing assets and constructing new power units, the Company’s fixed assets are characterized by high quality. The degree of depreciation of fixed assets is quite moderate and is around 25%. In addition, the Company’s assets operate with one of the highest installed capacity utilization rates in the UESR, which was over 85% in 2024.
AEP is a monopoly in the construction and management of NPPs in Russia and operates throughout the country. In addition, the Company’s portfolio includes multiple foreign projects in Belarus, Turkey, Hungary, China, India, Egypt, and Bangladesh.
Strong corporate governance of the Company supports its operational profile. The Agency notes strong scores for the strategy and the management structure, as well as a high degree of financial transparency.
In addition, the operational profile assessment includes a very high score for the market position. The Company fully controls all NPPs in the country, is one of the largest electricity generating companies in Russia, and ranks third in the world in terms of installed nuclear capacity (29.6 GW). The share of electricity generated at NPPs in 2024 amounted to 18.5% of the total electricity generated in the UESR. The Company is also a monopolist in the Russian market segments of NPP exports, uranium mining and enrichment, and fabrication and sale of nuclear fuel. AEP is the global leader in the uranium enrichment segment as it holds 39% of the global market. AEP ranks third in the world in uranium mining, with a 15% market share, and ranks third in the global nuclear fuel fabrication market with a 19% share.
The Company’s very large size and very high profitability support its financial profile. In 2024, AEP continued to demonstrate financial growth: its revenues increased by 18% year-on-year to RUB 2.50 tln. This contributed to a 15% increase in FFO before net interest payments and taxes compared to 2023 (to RUB 640 bln, or 42 bps of Russia’s GDP), which corresponds to a very high business size estimate based on the Agency’s methodology.
ACRA assumes that the FFO margin before interest and taxes will be at least 25% from 2025 to 2028.
High current leverage and low coverage constrain the financial profile assessment. The Company’s leverage continued to grow on the back of the extensive investment program. As of the end of 2024, total debt had increased by 47% (to RUB 2.9 tln), while the ratio of total debt to FFO before net interest payments was 6.0x. In addition, amid growth of the debt portfolio, the ratio of FFO before net interest payments to interest payments amounted to 2.1x in 2024, which corresponds to a low assessment of debt service. The Agency expects moderate improvement of leverage and coverage indicators in 2025–2028 amid expected growth of FFO before net interest payments and lower interest rates on commercial debt. ACRA notes that the Company has a comfortable volume of undrawn committed credit lines to service its debt obligations (coupled with a comfortable debt repayment schedule), as well as diversified sources of internal and external financing.
Negative FCF amid high capital expenditures. According to the Agency’s forecasts, AEP’s capital expenditures will remain high in the context of implemented projects, ranging from around RUB 800 bln to RUB 1 tln annually in 2025–2028. The weighted average ratio of capital expenditures to revenues for 2023–2028 is expected to be 27%. ACRA expects FCF to be negative in 2025–2028 due to high levels of capital expenditures. The expected weighted average FCF margin for 2023–2028 is -17%.
KEY ASSUMPTIONS
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The state maintaining control over the Company;
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The state maintaining support to enable the Company to fulfil all its obligations;
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Implementation of current domestic and foreign investment projects as planned by the Company;
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FFO margin before interest and taxes remaining at no lower than 25% in 2025–2028;
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Moderate annual dividend payments in 2025–2028 as per the Company’s projected model.
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 negative rating action may be prompted by:
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Loss of control by the state or significantly lower volume of support;
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Change in the composition of enterprises controlled by the Company and subsequent decline in its systemic importance for the state.
RATING COMPONENTS
SCA: a+.
Support: on par with the Russian Federation.
ISSUE RATINGS
No outstanding issues have been rated.
REGULATORY DISCLOSURE
The credit rating has been assigned to JSC AEP based on the following methodologies: the Methodology for Assigning Credit Ratings to Non-Financial Corporations under the National Scale for the Russian Federation to calculate the SCA and determine the credit rating and the credit rating outlook of JSC AEP under the national scale for the Russian Federation, Methodology for Assigning Credit Ratings with External Support to determine factors of external influence, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities to ensure consistent and uniform application of ACRA’s methodologies, models, and key rating assumptions.
The credit rating of JSC AEP assigned under the national scale for the Russian Federation was published by ACRA for the first time on November 30, 2023.
The credit rating and its outlook are expected to be revised within one year.
The credit rating was assigned based on data provided by JSC AEP, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS accounting (financial) statements of JSC AEP as of December 31, 2024. The credit rating is solicited and JSC AEP participated in its assignment.
In assigning the credit rating, 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 additional services to JSC AEP during the year preceding the rating action.
No conflicts of interest were discovered in the course of credit rating assignment.
