Bloomberg News

Transneft Downgraded to `Negative' on Russian Credit, S&P Says

October 24, 2008

OAO Transneft, Russia's state-owned oil pipeline operator, was downgraded to ``negative'' from ``stable'' after yesterday's cut on the country's credit rating, Standard & Poor's Ratings Service said.

``The outlook revision reflects the Russian government's diminishing ability to provide extraordinary support to Transneft,'' S&P said in an e-mailed statement today. The company's BBB+ long-term credit rating was affirmed.

Transneft plans to spend 303 billion rubles ($11.2 billion) building a 2,757-kilometer (1,700-mile) pipeline across Siberia to Skovorodino, near the Chinese border, by the end of 2009. The pipeline will in the next phase be extended to the Pacific.

``Oil companies will look to cut costs wherever possible,'' said Kevin Dougherty, a portfolio manager at Pharos Financial Group. ``Transneft's transit fees will likely come under political pressure and the success of the ESPO pipeline is certainly less certain with $60 oil than it was at $100 oil.''

Transneft's preferred shares fell 22 percent to 6,050 rubles at 2:09 p.m. when trading on the Micex Stock Exchange was halted until Oct. 28.

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

To contact the editor responsible for this story: Guy Collins at guycollins@bloomberg.net.


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