Azerbaijan, Baku, Sept. 13 / Trend A.Badalova /
Fitch Ratings has affirmed Kazakhstan-based JSC KazTransOil's (KTO) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-' and Short-term foreign currency IDR at 'F3', the agency reported on Thursday. The Outlook on the Long-term IDR is Stable.
According to the report, the affirmation follows Fitch's expectations of KTO's continued dominance in oil transportation in Kazakhstan, moderately declining crude transportation volumes and flat tariffs over the medium term, strong operating cash flows and negative net debt position on a sustained basis.
KTO's ratings reflect its dominating position in the oil transportation sector in Kazakhstan - in 2011 KTO shipped 59 percent of the crude oil produced in Kazakhstan, the report said. KTO also expects to receive the status of the national oil pipeline operator in Kazakhstan that would be credit-enhancing, in Fitch's view, as it will provide KTO with an exclusive right to provide oil pipeline operatorship services in the country.
The agency believes KTO is not exposed to significant volume risks and its oil shipments are well diversified by routes, even though 'ship-or-pay' provisions cover only about 20 percent of total oil shipment volumes in 2011.
According to the Fitch's estimates, KTO has a fairly stable business profile - in 2011 its consolidated crude turnover (excluding joint ventures) reached 34.5bn ton-km, up 0.8 percent yoy, and consolidated revenue reached KZT140 billion in 2011, up 1.6 percent yoy.
KTO generated 88 percent of its revenue from pipeline and rail crude oil shipments including oil reloading. It has a diversified customer base - its largest customer only accounted for 14 percent of total shipped crude volumes in the first half of 2012. The company had weaker results in the LTM ended June 30, 2012 with turnover and revenue declining by 4 percent compared to 2011, the report said.
Nonetheless, Fitch anticipates that this trend will reverse mainly due to the positive outlook for Kazakhstan's oil industry and the current limitations of alternative transit routes for Kazakh crude oil.
In 2012 KTO approved a special dividend to NC KMG for KZT 60 billion in light of the upcoming 'People's IPO', up from KZT 19 billion in 2011 and KZT 7.3 billion in 2010. Fitch believes that KTO's dividend payout should stabilise at a minimum of 40 percent of net income under IFRS after the planned IPO. Conversely, there is a risk that KTO will continue distributing surplus cash to its shareholders given NC KMG's significant debt burden; thus KTO's credit profile may not benefit from its strong expected FCF, the report said.