(The following statement was released by the rating agency)MOSCOW/WARSAW, October 03 (Fitch) Fitch Ratings is maintaining OJSC Moscow Integrated Power Company's (MIPC) Long-term foreign and local currency Issuer Default Ratings (IDR) of 'BB+' on Rating Watch Negative (RWN). This follows the recent ownership change driven by the City of Moscow's (BBB/Stable/F3) sale of its 89.98% stake in MIPC to OOO Gazpromenergoholding, a 100% subsidiary of OAO Gazprom (BBB/Stable) for RUB98.6bn. The RWN reflects uncertainty related to the new owner's strategy regarding MIPC including funding and capex, and any potential changes to the City of Moscow's subsidies for uneconomic tariffs following the recent sale. A full list of ratings actions is provided at the end of this rating action commentary.Before the recent sale, MIPC's ratings were notched down by two levels from those of the City of Moscow, its former majority shareholder, and reflected their strong operational and strategic ties, including tangible support in the form of subsidies to cover uneconomic residential tariffs. MIPC's ratings were placed on RWN on 4 April 2013 due to the planned privatisation of the City of Moscow's stake in the company. Following the recent disposal, Fitch will re-consider incorporating the City of Moscow's support into MIPC's ratings under the agency's Parent-Subsidiary Rating Linkage methodology. This would depend on its ties with the City of Moscow, if any, following the disposal, for instance related to subsidies. Fitch will also analyse the ties with the new owner, Gazpromenergoholding, under Fitch's Parent-Subsidiary Rating Linkage methodology and depending on the strength of the ties may either incorporate parental support into the ratings or the company's ratings may converge towards its standalone profile. Fitch assesses MIPC's standalone creditworthiness in the low 'BB' or high 'B' rating category.KEY RATING DRIVERS-Parental SupportFitch considers the acquisition of MIPC's stake to be strategic for Gazpromenergoholding. MIPC's acquisition matches Gazprom's strategy of vertical integration and creation of the full value chain and their operational inter-dependence in regard to gas supplies/purchases. We have not been provided with Gazpromenergoholding's future strategy regarding MIPC; however, Fitch would expect the timely financial support to be available if the need arises. This is based on evidence of support in another Gazpromenergoholding's subsidiary, OGK-2, which received a capital injection of  about RUB23bn through an additional share issue, and partly through a payment terms extension for OJSC Mosenergo's (BB+/Stable) gas purchases from Gazprom during the financial and economic crisis. Fitch notes that gas, used on all MIPC's generation facilities, is purchased from OAO Gazprom Mezhregiongas Moskva, owned by Gazprom, and that Mosenergo, owned by Gazprom, is the major supplier of heat energy to MIPC. Mosenergo supplies about 70% of its heat to MIPC's network. Fitch will review MIPC's ratings once the strategy regarding MIPC including funding and capex, as well as any potential changes to the subsidies for uneconomic tariffs become clear.-Supportive SubsidiesIn 2012, MIPC continued to receive large subsidies from Moscow to cover uneconomic residential utility tariffs. The subsidies amounted to RUB16.1bn in 2012 and for 2013 the company expects to receive about RUB14.5bn. However, Fitch expects that over time the subsidies will decrease as Moscow probably switches to a more targeted subsidisation of households by category.Modest Tariff GrowthFitch does not expect significant power volume growth in 2013, and power and heat price increases in the medium term are likely to fall below expected inflation. The maximum heat tariff growth for the City of Moscow for 2013 was approved at 2.7%, starting from 1 July.-Higher DebtAt end-2012, MIPC had unadjusted debt of RUB31.7bn, up from RUB21.7bn at end-2011 and from RUB9.9bn at end-2009. Higher leverage is mainly the result of the replacement of outstanding trade accounts payable to Mosenergo for loans from Sberbank of Russia (Sberbank, BBB/Stable) in 2011-2012 and partly as a result of OAO Moskovskaya Teplosetevaya Kompaniya's consolidation in October 2012.RATING SENSITIVITIESPositive: Future developments that could lead to positive rating actions include:- An economic residential heat tariff and profitable operations. However, Fitch does not expect this to happen in the medium term. Negative: Future developments that could lead to negative rating action include:- the new parent's strategy, which may adversely affect the availability of support and the parent-subsidiary arrangements put in place (including the effect of possible acquisition funding)- A reduction of subsidies or other forms of tangible support from the City of Moscow following the privatisation.LIQUIDITY AND DEBT STRUCTUREWeak but Manageable LiquidityAt end-H113 MIPC had RUB25.7bn of short-term debt compared with RUB5bn of cash in hand, RUB1bn of unused credit facilities and RUB7.4bn under new loan agreement with Sberbank signed in July 2013. Most of the short-term debt comprises loans from state-owned Sberbank, which are likely to be renewed or extended. In July 2013 MIPC redeemed its RUB6bn local bonds. In 2011-2012, MIPC rolled over its short-term bank loans and concluded long-term loan agreements with Sberbank that mature in 2013-2014. Fitch expects MIPC to roll over its short-term bank loans in 2013. We expect MIPC's free cash flow to remain negative in 2013.FULL LIST OF RATING ACTIONSLong-term Foreign Currency IDR of 'BB+' maintained on RWNLong-term Local Currency IDR of 'BB+' maintained on RWNNational Long-term Rating of 'AA(rus)' maintained on RWNShort-term Foreign Currency IDR affirmed at 'B'National Short-term Rating of 'F1+(rus)', maintained on RWNContact: Principal AnalystOxana ZguralskayaAssociate Director+7 495 956 7099Supervisory AnalystArkadiusz WicikSenior Director+48 22 338 62 86Fitch Polska S.A.Krolewska 1600-103 WarsawCommittee ChairpersonAngelina ValavinaSenior Director+44 203 530 1314Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.Additional information is available on 
  www.fitchratings.com
 Additional information is available on 
  www.fitchratings.com.
  For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary. Applicable criteria, 'Corporate Rating Methodology', dated 5 August 2013, are available at 
  www.fitchratings.com.
 Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
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