The ‘A’ rating indicates that PJSC Stroytransgaz qualifies as a highly reliable borrower. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of a loan is minimal.

We appreciate the growing net profit, higher return ratios, rapidly shrinking loan debt, favorable debt profile and smart business diversification as the rating drivers for PJSC Stroytransgaz.

One of the strong points in the company’s performance is the recent net profit growth trend. In 2012, net profit of PJSC Stroytransgaz increased by more than 29% to RUB 604.3 million reaching a six-year record high.

The operational efficiency and growing return ratios also contribute to the Company’s rating. Over the last 12 months, PJSC Stroytransgaz has been steadily increasing its key performance indicators. At the end of 2012, many of the Company’s return ratios hit six-year highs. As of the end of the fourth quarter 2012, return on assets (ROA) almost doubled to 1.41%, return on equity (ROE) was 19.73%, EBITDA margin increased from 9.91% to 10.12%, return on invested capital (ROIC) and net profit margin increased more than twice to 3.34% and 2.42%, respectively.

The credit rating is essentially supported by the quickly decreasing loan debt. In 2012, PJSC Stroytransgaz reduced its debt burden from RUB 29.4 billion to RUB 9 billion (almost 3.25 times). As a result, debt to equity ratio decreased more than four times to 6.98 in 2012, while financial risk ratio dropped almost 9 times to 1.53.

Another powerful rating driver is the Company’s business diversification. Since recently, PJSC Stroytransgaz has been committed to high-margin business segments such as the construction of power engineering facilities and road building operations, which increases immunity against industry-specific risks.

The favorable debt profile also supports the rating score. Long-term loans, the most reliable funding source in the way of investment activities, formally account for most of PJSC Stroytransgaz’s portfolio (67%), which improves the Company’s financial position. Besides, given that the Company’s sole lender is PJSC Stroytransgaz, this percentage is fairly flexible upwards. Also, the share of loans denominated in Russian rubles is 100%, which minimizes the Company’s foreign currency-related risks amid the financial market turbulence.

At the same time, the persistent debt burden, low equity compared with total capital, and continuously shrinking assets are exerting pressure on the Company’s credit rating.

Despite a favorable downward trend in the total amount of liabilities, PJSC Stroytransgaz is still saddled with heavy debts, which prevents a higher credit rating.

Another negative signal for the rating is the low share of equity in the total capital of PJSC Stroytransgaz (12.5% at the end of 2012, even after a substantial increase).

Also, the downward trend in the assets of PJSC Stroytransgaz observed since early 2011 is working against the rating score. In particular, the Company’s assets decreased by 30.4% for 12 months 2011, further dropped by 30.8% in 2012, as PJSC Stroytransgaz disposed of its non-core assets and repaid its existing loan debt.

PJSC Stroytransgaz established 1990 is one of the largest construction and development companies in Russia and the CIS implementing and managing industrial construction projects in the fuel / energy and other sectors for over 20 years. The company provides all types of large-scale project implementation services from project documents to guarantee maintenance. The Stroytransgaz group encompasses building, engineering, industrial, oil / gas, and financial entities employing more than 10,000 people. The company’s units are located in 9 regions of Russia and 14 countries of the world. Equity capital of PJSC Stroytransgaz as of the end of 2012 was RUB 4.4 billion, assets totaled RUB 35 billion.2

Full name: Public Joint Stock Company Stroytransgaz.

Short name: PJSC Stroytransgaz, PJSC STG.

This press release is based on the statement of assigning a credit rating to PJSC Stroytransgaz.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company’s credit standing and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities.

AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. AK&M Rating Agency is accredited by theMinistry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).

AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), the MICEX (for the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation and bond listing purposes). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.

CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: A.G. Chumachenko
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.