S&P: Samruk-Kazyna playing central role in helping Kazakhstan meet key economic objectives

Business Materials 1 July 2020 10:28 (UTC +04:00)

BAKU, Azerbaijan, July 1

By Nargiz Sadikhova - Trend:

S&P Global Ratings has affirmed its 'BB+/B' long- and short-term issuer credit ratings on Kazakhstan’s Samruk-Kazyna Sovereign Wealth Fund, the outlook is stable, Trend reports with reference to the S&P.

S&P has also affirmed its 'kzAA+' Kazakhstan national scale rating on Samruk-Kazyna and its 'BB+' issue rating on the company's senior unsecured debt.

The report said that affirmation reflects S&P’s view of an almost certain likelihood that Samruk-Kazyna would receive extraordinary support from the government of (BBB-/Stable/A-3), its sole shareholder, in case of need, owing to Samruk-Kazyna's:

- Critical role for the government as the main vehicle for implementing its agenda for strategic industrialization and long-term economic sustainability and diversification.

- Integral link with the government, which is the company's sole shareholder.

“Although we assess the likelihood of extraordinary government support for Samruk-Kazyna as almost certain, our long-term rating on the company remains one notch below that on Kazakhstan due to our concerns that Kazakhstan's willingness to support the government-related sector is subject to transition risk. We assess Samruk-Kazyna's stand-alone credit quality, absent extraordinary government support but including ongoing support, in the 'b' category,” the report said.

In S&P view, the report said, Samruk-Kazyna still benefits from adequate, ongoing support from the government through concessional budget loans and regular capital injections from the budget, particularly when the company has been asked to implement a government investment project that might otherwise result in a deterioration of its financial standing.

The S&P also noted that in their view, the company plays a central role in helping the government meet key economic, political, and social objectives.

In 2015, the government announced plans to privatize some of Samruk-Kazyna's assets, including those in the energy, mining, and transport sectors, to attract foreign direct investment and stimulate economic growth.

“The privatization list features some 215 entities owned and operated by Samruk-Kazyna. The largest of its subsidiaries - AirAstana, Kazatomprom, Kazakhtelecom, KazMunayGas, Kazakhstan Temir Zholy, Samruk-Energy, and Kazpost - are targeted for initial public offerings. According to government plans, a 15 percent-25 percent share of those companies is to be floated on the Astana stock exchange by 2020. In June 2020, Samruk-Kazyna sold the remaining 6.3 percent of Kazatomprom shares (of 25 percent eligible for sale), raising $206 million. The company plans to sell 10 percent of Kazakhtelecom to the Unified Accumulative Pension Fund in 2020, but further privatizations of major assets are on hold for the remainder of the year,” the report said.

S&P said it would likely change our rating or outlook on Samruk-Kazyna if it took a similar rating action on Kazakhstan.

“We could lower the ratings on Samruk-Kazyna if the government intervened in a way that harmed the company's long-term financial stability, or we saw signs of waning government support, to the group or, more broadly, support to other government-related entities (GREs) over the next 12 months,” the report said.

S&P also said it could raise the rating on Samruk-Kazyna if both Kazakhstan's monitoring of its GRE debt and the efficiency of administrative mechanisms to provide extraordinary support to Kazakh GREs improved.


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