Baku, Azerbaijan, April 30
By Ali Mustafayev - Trend:
The share of gas trading in KTG’s revenues will increase to 80 percent-85 percent by 2020 from about 67 percent in 2017, S&P Global Ratings said in a message.
The increase is due to additional volumes of gas supplies to China.
“The cost of purchased gas is currently relatively low for KTG, due to its status as a national operator, and we expect the company could report at least a 20% EBITDA margin on gas sales for export. We view KTG's gas-trading operations as more volatile than its core transportation and transit midstream business, because gas extraction volumes could depend on the specific conditions of the oil and gas fields, purchase prices differ by supplier, and future price adjustments cannot be ruled out”, S&P said in a message.
The agency also views KTG's financial risk profile as aggressive, which includes the assessment of the company's volatile cash flows during stress periods, reflecting exposure to volumes and price risks of export gas trading.
“This made us to revise our assessment of KTG's stand-alone credit profile (SACP) to 'bb-' from 'bb' previously. We expect the credit metrics could weaken further, such that FFO to debt is about 20 percent in 2018. However, we believe that the higher leverage will be temporary, and that KTG will achieve stronger results in 2019, with completion of compression stations construction and increased gas sales to China.”
S&P Global Ratings affirmed its 'BB-' long-term issuer credit ratings on Kazakh gas utility company KazTransGas (KTG) and its 100 percent owned gas pipeline operator Intergas Central Asia JSC (ICA) on April 30 . The outlook on both entities is stable.
The affirmation reflects S&P’s unchanged expectation of a moderately high likelihood that KTG would receive timely and sufficient support from the government of Kazakhstan, if needed.
“It also reflects our continued view of KTG's moderately strategic status for its 100 percent parent, KazMunayGas JSC (KMG; BB-/Stable), and its close links with the parent. Having said that, we believe that KTG’s stand-alone financial metrics have weakened somewhat on the back of enlarged investment program and new debt issued to fund a loan given to its 50/50 joint venture, with funds from operations (FFO) to debt at about 25 percent in 2017 compared with our previous expectation of 30 percent-35 percent,” S&P said.
The agency believes KTG’s financial metrics will become more volatile going forward, because of the increasing share of exports in its gas trading business, which is vied as more volatile than KTG’s core gas transportation operations.