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Fitch affirms Kazakh Astana Gas' rating

Business Materials 20 November 2018 17:34

Baku, Azerbaijan, Nov. 20

By Rashid Shirinov – Trend:

Fitch Ratings has assigned Kazakh JSC Astana Gas KMG (AG) a long-term issuer default rating (IDR) of 'BB' and national long-term rating of 'A(kaz)', reads a message by the rating agency.

The Outlooks are Stable.

The message notes that AG intends to build and operate the Saryarka domestic gas pipeline that will transport natural gas from the west of Kazakhstan to the capital Astana, which currently uses coal and fuel oil for its energy needs.

“Kazakhstan indirectly owns 100 percent of AG via Samruk JSC and Baiterek JSC. AG receives significant cash support from the government to build the pipeline,” Fitch noted.

The message also reads that Kazakhstan provided a capital injection via Samruk and Baiterek of 80.3 billion tenge, which constitutes 30 percent of the estimated total project cost.

Fitch expects mostly state-related creditors to provide the remaining 70 percent, and AG to continue to receive tangible financial support from the government in case of cost overruns during the pipeline's construction.

The rating agency added that developments that may lead to negative rating action are a downgrade of Kazakhstan's sovereign rating; a reduction in implied support and commitment from the government, as well as importance of the project to Kazakhstan. Significant cost and time overruns during construction that are not remedied by the government may also lead to a downgrade.

AG will build the Saryarka domestic gas pipeline with a total length of more than 1,000 kilometers to transport natural gas from fields in western Kazakhstan to Astana and to 170 smaller towns along the pipeline route.

The project cost is estimated at 267 billion tenge ($0.73 billion). Construction is scheduled to start in the fourth quarter of 2018 and finish by the end of 2019 with final commissioning by June 2020. Designed capacity is 500 million cubic meters a year with option to quadruple it with additional compressor stations.

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