On September 29, 2020, S&P Global Ratings affirmed the rating of Russian Power Generator TGC-1 at 'BBB-' with a stable outlook, the rating agency informed.
S&P expects TGC-1's EBITDA to weaken in 2020-2021 due to gradual expiration of capacity supply agreements. EBITDA will likely decline to RUB21 billion-RUB23 billion in 2020 and RUB16 billion-RUB18 billion in 2021, from a peak of RUB28.2 billion in 2019. The deterioration stems from the gradual expiration of profitable legacy capacity supply agreements that will reduce capacity revenue to RUB19.0 billion in 2020 and RUB13.5 billion-RUB14.5 billion in 2021-2022, from about RUB20.2 billion in 2019.
Still, capacity revenue will remain a solid and stable contributor to EBITDA, representing between 70% and 80%. This is an inherent benefit of the Russian electricity market, S&P notes.
Positively, TGC-1 will likely remain relatively resilient to COVID-19 impacts and economic recession in Russia.
The stable outlook reflects S&P expectation that TGC-1's funds from operations to debt will stay above 45%, the rating on its ultimate parent Gazprom is likely to be 'BBB-' or higher, and GazpromEnergoHolding remains Gazprom's vehicle.
PJSC Territorial Generating Company no. 1 (TGC-1, part of Gazprom energoholding group) is a leading electricity and heat producer and supplier in the Northwestern macro region of Russia. TGC-1 comprises 53 power plants in four regions of the Russian Federation: St. Petersburg, the Republic of Karelia, Leningrad and Murmansk regions.
TGC-1 comprises the following subsidiaries and affiliates: PJSC Murmanskaya CHPP (electricity supplies to Murmansk and surrounding areas, equity stake: 98.85%), JSC Hibiny Heat Company (HHC, heat supplies to the Apatity-Kirovsk region, equity stake: 50%), JSC St. Petersburg Heating Grid (a system of heat distribution networks in the area served by the company's combined heat and power plants, equity stake: 71.57%) and TGC-Service LLC (a specialized repair company, equity stake: 26%).
IFRS profit of TGC-1 for 2019 decreased by 23.3% to RUB 7.99 billion from RUB 10.421 billion a year earlier. Revenue increased by 5.2% to RUB 97.255 billion from RUB 92.455 billion resulting from higher revenues from sales of electricity and capacity, as well as higher heat sales. EBITDA increased by 7.7% to RUB 22.5 billion from RUB 20.887 billion.
RAS net profit of PJSC TGC-1 for 2019 increased by 33.8% to RUB 9.494 billion. The company's revenue totaled RUB 90.836 billion growing by 4.3% year-on-year. Gross profit amounted to RUB 11.848 billion (+9.9%). EBITDA increased by 11.7% to RUB 19.475 billion.
TGC-1's IFRS profit for 1H20 decreased by 27.4% to RUB 6.75 billion from RUB 9.302 billion a year earlier.
