Statement on rating
The Slovak Rating Agency grants to the company TRANSPETROL, a.s. the following rating :
| Long-term local currency rating | BBB- (stable outlook)
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| Long-term foreign currency rating | BB- (stable outlook)
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| Short-term rating | S2
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The granted long-term rating in the category of transactions in Slovak crowns BBB- (stable outlook) is three degrees lower than state rating ( A - stable outlook). In the category of forex transactions TRANSPETROL, a.s. was granted rating BB- (stable outlook), which is under the level of risk of the Slovak Republic (BBB- stable outlook). The short-term rating of TRANSPETROL, a.s. is S2, which is the best possible short-term rating for entities reaching long-term rating BBB.
Rationale:
- TRANSPETROL is one of the strategic enterprises of the Slovak Republic and as the only operator of the oil pipeline system in Slovakia it qualifies to the category of so-called natural monopolies. It ranks among the most important Slovak enterprises. In our opinion, one of strengths of the company is stability of revenues which results from dependency on oil imports. However their amount is very dependent on the volumes of transported and stored oil for final producers. The company manages assets in total value of SK 8 367 mil. (the increase of 19,53 %), and sales in 2000 reached the level of SK 2 073 mil. (which means the year-on-year decrease 2000/1999 of 2,42 %). Profit was reported in volume of SK 97,7 mil. (which means the year-on-year decrease 2000/1999 of 71,99 %) and indebtedness is at the amount of 25,05 %, whereby its increase of 14,46% was recorded as well.
- We perceive the sale of TRANSPETROL to a foreign investor as potential strengthening of the influence of the company in the region. The companies applying for the purchase of the package of 49 % of shares provide the possibility of entry in new markets which would allow to increase the volume of oil transported through the territory of the Slovak Republic. But the litigation of the Ministry of Economy of the Slovak Republic for 565 shares of the company TRANSPETROL against the company C.S.I. - CD, a.s., Vranov nad Top¾ou may significantly complicate the privatization of the company before its completion.
- The solvency of TRANSPETROL, or the willingness and ability to pay its debts, very much depends on strategie plans and decisions of the only shareholder, the Ministry of Economy of the Slovak Republic. It is necessary to warn of the risk that the only shareholder of the company (The Ministry of Economy of the SR) uses the company for purposes which are in exclusive interest of the government and contrary to the business plans of the company. The company has concluded credit contracts under which it has a limited disposal of its assets, or some acts, as well as the obligation to reach the specified level of results of both economic and financial indicators the attainment of which depends on the decision of the only shareholder.
- In the framework of the implementation of acquis communitaire in the section Energy the Slovak Republic undertook to meet its requirements in the area of storage before the end of the year 2008. It resulted in the obligation for the company to increase and harmonize the capacity of stock reserves with EU standards. In our opinion the investment project presents some risk to the extent that the company will have to bear all investment costs related to the formation of sufficient stock reserves alone.
- The company has developed strong internal control mechanisms of vertically managed company, with exactly defined competencies and powers at the individual levels which are the key to effective management and which the company uses in full extent.
- The strategic opportunity which can significantly affect further management and operations of the company, results from the new oil deposits found in the Caspian Sea that are of high interest for the West Europe.
- We positively evaluate the investment activities of the company in the area of environment and resulting certification of the company according to STN EN ISO 14001 as the only company in Central Europe. The company has also adopted the conception of the development of the Environmental Management System.
Slovak Rating Agency
Bratislava, 27 November 2001