S&P said the national scale rating on the Russian electricity transmission grid operator has been raised from ruA+ to ruAA+. The outlook on the ratings is positive.
The ratings have been removed from CreditWatch, where they were placed with positive implications in November, 2006.
"The upgrade reflects the increased probability of extraordinary government support for FGC in case of financial distress, and follows a review of Russian governmental influence on government-related entities," said agency credit analyst Eugene Korovin.
The analyst said the upgrade is also due to a reduction in FGC's strategic and regulatory risks resulting from further progress in power sector reform.
Current ratings reflect the group's "high investment needs ensuing from an aged and obsolete transmission grid, growth in national power demand, an ambitious investment plan heavily reliant on external financing, a relatively concentrated customer base, the risks of credit-detrimental revisions to the power sector reform plan, and interference from the weaker parent," Korovin said.
However, the agency cited state support, tariff regulation and the company's monopoly position as positive factors.
S&P said it may upgrade its rating on the Federal Grid Co. further if the risks disappear with FGC's separation from UES and its transition to direct control from the Russian government, but that evidence of weaker government support could impair existing upside potential.
