Press Releases / 10.05.2016

Press Release as of 10.05.2016

“BerozkaGaz Ugra” JSC

AK&M Rating Agency has assigned an 'A' tier 3 national scale credit rating to BerozkaGaz Ugra JSC. The outlook is stable.

The 'A' rating indicates that the Company is highly creditworthy. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal. The rating assignment was based on the Credit Rating Methodology for Corporates (Issuers) and their Financial Assets. (rev. January 23, 2014, including the amendments approved by the Methodology Committee on February 18, 2015).

BerozkaGaz Ugra JSC (previous name: CJSC YugraGasProcessing) operates in the Russian market as a company specializing in the value-added use of associated gases produced at the Salym fields and the Shapshinsky cluster of fields in Khanty-Mansi autonomous area - Yugra.

The positive rating drivers for BerozkaGaz Ugra JSC include the Company's steadily growing output of core products, steady increase in revenues, growing assets, high turnover of accounts receivable and payable, high efficiency of production expenses, high financial viability, a comfortable debt profile (the Company's debt is dominated by long-term credits and loans maturing beyond the next 18 months); high loan debt servicing efficiency, with obvious improvements in the debt structure in terms of foreign currency-denominated debt percentage and debt maturity, as well as the coverage of projected loan debt servicing expenses by sufficient financial resources over the next 18 months.

Electricity, industrial propane-butane and stable natural gasoline account for more than 90% of the total revenue from sales of products at BerozkaGaz Ugra JSC. In recent years, the output of these products has been growing steadily in physical terms.

In 2015, BerozkaGaz Ugra JSC increased the 12-month electricity output to 175.6 million kWh. Over the last two years, the Company's 12-month electricity production grew by 26.4%. Last year's output of the industrial propane-butane mix by BerozkaGaz Ugra JSC reached 88.4 thousand tonnes increasing by 40.3% over the last two years. BerozkaGaz Ugra JSC produced 42.9 thousand tonnes of stable natural gasoline at its capacities in 2015, the total output increasing by 77.7% in the last two years.

In 2015, the rated Company's revenue from sales reached a historic high of more than RUB 2.2 billion. As a whole, sales revenue of BerozkaGaz Ugra JSC grew more than twice for the last three years. In 2015, the revenue from sales of goods and services saw a growth rate of 1017% against the 2011 benchmark level.

In 2015, assets of BerozkaGaz Ugra JSC exceeded RUB 7.8 billion reaching the highest level in the Company's history. In the last two years alone, assets of BerozkaGaz Ugra JSC increased by 16.1%.

The turnover of accounts receivable and payable at BerozkaGaz Ugra JSC is fairly high. In 2015, the accounts payable turnover ratio was 15.5, the accounts receivable turnover ratio was 24.89. The ratio between them always exceeded 1 in the last four years and increased from 1.56 to 1.61 in 2015. The relatively high accounts payable and receivable turnover reflects the Company's high industrial adaptability.

Over the last four years, BerozkaGaz Ugra JSC steadily earned more than two rubles in revenues per ruble of production expenses. Besides, the Company's gross margin ratio stayed above 50%, its markup on cost exceeded 100%, which testifies to high efficiency of BerozkaGaz Ugra's production expenditure.

On the financial side, BerozkaGaz Ugra JSC benefits from a strong liquidity position. Its lowest current liquidity ratio in the last four years (2.48) was in 2012; last year, this ratio reached 3.77. The Company's absolute liquidity ratio also improved substantially from the minimum level in the period under review (1.32) in 2012 to 1.54 in 2015.

BerozkaGaz Ugra JSC also maintains good financial viability. In 2015, the Company's financial stability ratio (equity plus long-term debt to total assets ratio) increased to 0.983, the highest level in the 4-year period under review, against the minimum level of 0.96 in 2012. Therefore, the financial stability ratio of BerozkaGaz Ugra JSC has stayed at almost perfect levels in recent years.

The financial position of BerozkaGaz Ugra JSC is strengthened by a comfortable debt profile (the ratio being 0.01). The Company's debt is dominated by long-term credits and loans. At the end of April 2016, the debt obligations of BerozkaGaz Ugra JSC arose from three large loans maturing in 2024 (accounting for approximately 80% of the total amount of debt) and one large bank loan with final maturity in 2022.

In AK&M Rating Agency's view, BerozkaGaz Ugra's efficiency in servicing its loan debt is fairly high and encourages optimism. While making debt servicing payments without delays, the Company has repaid two credits and one loan before maturity. The total amount and relative share of the Company's foreign currency-denominated debt decreased by mid-April 2016, which, under current conditions, substantially reduces related debt servicing risks. This testifies to the successful financial management of BerozkaGaz Ugra JSC and improves its creditworthiness.

Under the current financial borrowing contracts of BerozkaGaz Ugra JSC, as of mid-April, the undrawn amount was 52.7 million US dollars for one of the loans, RUB 750 million for the bank credit. The total amount of the Company's undrawn loans is substantially (more than 1.5 times) above the projected debt servicing expenses until the end of 2017, which essentially supports the credit rating of BerozkaGaz Ugra JSC for the following 12-month period.

The Company's rating is constrained by its loss from current operations according to RAS (Russian GAAP) standards, a heavy long-term debt burden and a high share of foreign currency-denominated debt, considerable dependence on borrowings and a rather low ratio of accounts receivable to payable.

While the operating sales earnings of BerozkaGaz Ugra JSC stayed above zero every year in the period under review, its net 12-month financial results were negative (according to RAS / Russian GAAP standards), one of the key reasons being revaluation of foreign currency-denominated credits and loans.

The credit & loan debt of BerozkaGaz Ugra JSC has been growing steadily since 2011. At the end of 2015, the Company's debt, according to the balance sheet report, was estimated at more than RUB 18,970 million. At the start of 2016, BerozkaGaz Ugra's debt to revenue ratio based on liabilities was 8.61, the debt to revenue ratio based on the credit and loan debt (the bank loan, subordinated loans and interest payable on credits and loans) was 8.51 (it should be noted that the net bank debt to revenue ratio was 0.73 on December 31, 2015). Total liabilities of BerozkaGaz Ugra JSC at the start of 2016 exceeded the Company's assets almost 2.5 times. Despite a reduction by mid-April 2016, the credit & loan debt burden on BerozkaGaz Ugra JSC remains heavy.

About 80% of BerozkaGaz Ugra's credit & loan debt is denominated in US dollars. The lack of certainty as to changes and fluctuations in the Russian ruble to US dollar exchange rate in 2016-2017 bears certain currency risks. Should the Russian ruble continue to weaken against the US dollar, the need to increase interest payments could strengthen the debt burden on BerozkaGaz Ugra JSC.

The accumulation of uncovered losses was the main reason for an increase in financial dependence of BerozkaGaz Ugra JSC. At the start of 2016, the Company's uncovered losses reached RUB 1.4 billion, with the result that the equity to total assets ratio of BerozkaGaz Ugra JSC is currently below zero, its absolute value growing steadily (from -0.9 in 2014 to -1.46 in 2015).

Another rating constraint is a relatively low accounts receivable to payable ratio. While increasing from 0.55 to 0.72 in 2015, this ratio is still far from perfect levels.

It should however be noted that BerozkaGaz Ugra JSC has almost completed active efforts aimed at restructuring the foreign currency-denominated credit & loan debt, reducing its relative share in the total loan debt and converting a large part of subordinated loans into bills of exchange (which will enable the Company to reduce expenses for the servicing of subordinated liabilities by approximately 62%).


BerozkaGaz Ugra JSC was established in October 2008 under the previous name of CJSC YugraGasProcessing) to implement a pilot project of its parent company (MONOLIT LLC, later rebranded as BlueLine Project LLC, then as BerozkaGas Company) in Khanty-Mansi autonomous area - Yugra. The aim of the project was to create, commission and use associated gas treatment (processing) capacities at the Salym fields (Salym Petroleum Development N.V.) and the Shapshinsky cluster of fields (RussNeft), to create and subsequently operate the power generating complexes supplying electricity to the Shapshinsky cluster of fields.

Today, BerozkaGaz Ugra JSC operates within BerozkaGas Company LLC as a production and engineering company implementing construction, reconstruction, modernization and technical upgrade projects for APG processing complexes, electricity generation, transmission and distribution facilities and managing the operation of these production complexes and facilities. The operation of the APG processing facilities, the core element of BerozkaGaz Ugra's business, contributes to the environmental program of Khanty-Mansi autonomous area – Yugra.

Full name: "BerozkaGaz Ugra" Joint Stock Company

Short name: "BerozkaGaz Ugra" JSC

Location: Tobolsky Trakt 4, Khanty-Mansiysk, Khanty-Mansi autonomous area - Yugra, Tyumen region, 628011 Russia

As of January 1, 2016, assets of BerozkaGaz Ugra JSC amounted to RUB 7.8 billion, the authorized capital was RUB 1 million. The Company's reports are audited by MICROPOL-CONSULTING LTD.

This press release refers to the Statement of assignment of a credit rating to BerozkaGaz Ugra JSC based on the Credit Rating Methodology for Corporates (Issuers) and Financial Assets rev. January 23, 2014 including the amendments approved by the Methodology Committee on February 18, 2015). An upward deviation was made from the rating methodology, seeing as the amount undrawn by BerozkaGaz Ugra under the long-term credit lines is more than enough to service the debt of BerozkaGaz Ugra JSC in the forthcoming 12-month period.

AK&M Rating Agency has assigned a credit rating to BerozkaGaz Ugra JSC for the first time. All rating action announcements are available on the website.

The rating is valid until May 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Company's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the Company. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

The rating, along with any information and conclusions provided in this press release, only conveys our reliability opinion and shall not be construed as a recommendation to make investment decisions.

AK&M Rating Agency shall not be held liable 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

Ul. Gubkina 3, Moscow, Russia

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.