Russia’s NCSP Upgraded to BB on Potential Transneft Support

The rating of Russia’s Novorossiysk Commercial Sea Port (NCSP) has been increased to BB with a positive outlook due to a potential support from parent company Transneft, according to ratings agency Standard & Poor’s.

The upgrade reflects the agency’s view of the ongoing integration of NCSP into the Russian government-owned Transneft group.

“Transneft, in our view, considers these assets’ operational stability as important for its core business of pipeline oil transportation for exports, with NCSP representing a natural extension to this business,” S&P said.

“Therefore, we believe that it is in Transneft’s interest to ensure there are no delays or accidents at these terminals.”

The agency further noted that the sale of the Novorossiysk Grain Terminal (NGT), in February 2019, revealed a risk that the sale of non-oil businesses could continue, over time leading to reduced scale, cargo diversity, and efficiency of the port.

S&P also said the company had not yet officially abandoned plans to invest into the port of Taman, which could potentially result in a meaningful investment of up to USD 500 million.

NCSP could be upgraded again in the next 12 months if the new strategy approved by Transneft provides more clarity on leverage, dividends, and expansion capex, the rating agency added.

NCSP owns and operates oil terminals in Novorossiysk and Primorsk, which handle about 35% of Russia’s oil exports through ports.