S&P Affirms Transgaz At BB+/BBB-; Outlooks Stable

05.05.2011 By Florentina Dragu

Standard & Poor’s Thursday affirmed its foreign currency corporate rating on Romanian gas pipeline operator Transgaz Medias (TGN.RO) at 'BB+' and the local currency corporate rating at 'BBB-', both with stable outlooks.

"The affirmation reflects our belief that Transgaz will maintain robust credit metrics, despite the regulator's postponement of the full recovery of volume shortfalls to an uncertain time in the future," the ratings agency said in a statement.

S&P estimates Transgaz will continue to transport high quantities of gas in 2011-2013 and the company's financial results will remain robust.

"We base our anticipations on our assumption that Transgaz's dividend payout on profits in 2011 and beyond will revert to 50%, after the government's imposed temporary hike to 90% for state-owned companies as part of the national fiscal consolidation strategy," the agency said.

It added that Transgaz should be able to absorb the financial and potential liquidity implications of an extraordinary one-off increase in its dividend payout.

"We understand that Transgaz has filed a waiver for the exceptional dividend distribution on 2010 profits, and that the outcome should be known over the coming weeks. If the waiver is granted, we anticipate an increase in Transgaz's investments in 2011," the statement noted.

S&P's base-case scenario doesn't include the financial impact of Transgaz's participation in the Nabucco pipeline project, the agency said.

Transgaz is 73.5% owned by the Economy Ministry, while investment fund Fondul Proprietatea (FT.RO) holds a 14.98% stake.

The ministry plans to sell a 15% stake in Transgaz in the second half of 2011.

"Despite the Romanian government's plan to sell a 15% stake in Transgaz, we continue to view the link between the government and Transgaz as "strong," assuming the state maintains effective control," S&P said.

The managing board of Transgaz called a shareholder meeting for June 9, proposing the same dividend value, despite Economy Ministry's request to reanalyze the dividend payment. The ministry asked the board to review the issue, citing a possible rating downgrade if Transgaz is not able to finance its investment plans.

Thursday in Bucharest, Transgaz shares were down 0.3% at RON248.2, in line with the general market trend.


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