S&P TO LEAVE GAZPROM AND ROSNEFT'S RATINGS ON THE LIST TO BE REVISED TO "DEVELOPING"

MOSCOW, February 2 (RIA Novosti) - The Standard & Poor's rating agency decided to leave long-term credit ratings of the Rosneft state-owned oil company at the "B" level, on the CreditWatch list "with developing implications".

The agency points out that this decision was taken after the announcement that the purchase of a 76.8% stake in Yuganskneftegaz (a former Yukos' subsidiary) for $9.3 billion was partially financed from the China National Petroleum Corporation's advanced payment of $6 billion for oil supplies over the next 5-6 years, and also from the Russian banks' loans.

On December 24, 2004, when Rosneft declared itself as the actual holder of a 76.8% stake in Yuganskneftegaz, Rosneft's ratings were placed on the CreditWatch list "with developing implications".

Simultaneously, Gazprom's ratings (placed on CreditWatch to be revised on November 30, 2004, when the company reported its intention to participate in the auction for the sale of Yuganskneftegaz) remained intact on Creditwatch. This is a proof of the government's plans to buy a controlling packet of Gazprom shares in exchange for Rosneft.

To quote Yelena Anankina, a S&P's credit analyst, "Gazprom and Rosneft's ratings on CreditWatch show S&P's fears of a possible increase in the companies' debt burdens after the purchase of Yuganskneftegaz (especially, as far as the short-term and secured debts are concerned), and also of the uncertain terms of oil supplies under the contract with the CNPC."

Standard & Poor's is also concerned about sizeable tax claims to Yuganskneftegaz and the risks of court proceedings initiated by Yukos at foreign courts. The agency's experts point out that there is no knowing whether the companies will receive substantial support from the state to compensate for the growing financial risks.

Standard & Poor's believes that the extent of state support is largely determined by stimuli and economic policy. Therefore, this support will hardly increase due to the recent rise in Russia's sovereign rating to "BBB-/Stable/A-3" on foreign currency obligations, and to "BBB/Stable/A-3" on obligations in national currency.

"Ratings' positions on CreditWatch also reflect the uncertainty as regards the terms and conditions of the Gazprom-Rosneft merger," Anankina said in conclusion.