BAKU, Azerbaijan, Jun. 29
By Nargiz Sadikhova - Trend:
Fitch Ratings has affirmed Kazakhstan’s Samruk-Energy's long-term issuer default ratings (IDR) at 'BB' and upgraded the energy company's senior unsecured rating to 'BB' from 'BB-', Trend reports with reference to the Fitch.
The outlook on the IDR is stable.
“We have revised Samruk-Energy's Standalone Credit Profile (SCP) higher to 'b+' from 'b', on the back of improved leverage and diminished foreign-exchange (FX) risks. The upgrade of the senior unsecured rating reflects lower structural subordination and average recoveries for unsecured creditors,” the report said.
The Fitch said that the revised SCP reflects a stronger financial profile, due to improved credit metrics and diminished FX risks.
“Despite our expectations that Kazakh GDP will contract 1.8 percent in 2020, which will translate into lower electricity generation volumes, we forecast Samruk-Energy's funds from operations (FFO) gross leverage to average 3.8x over 2020-2023, down from 4.8x on average over 2016-2019. This is also supported by above-average electricity tariff increases for 2020 for its Shardara hydro power plant (HPP) and Moinak HPP and high investment tariffs for capacities of Shardara HPP, Moinak HPP and Almaty Power Stations,” the report said.
Fitch said that it has upgraded the senior unsecured rating to align it with the company's IDR after prior ranking debt-to-EBITDA ratio decreased to below 2x at end-2019, which Fitch expects to remain so over 2020-2023.
“At end-2019 the government approved investment tariffs for capacity of new power units at Shardara HPP, Moinak HPP and Almaty Power Stations 4x-7x higher than the market capacity tariff. Capacity sales under investment tariffs represent about 16 percent of Samruk-Energy's EBITDA. These tariffs are approved until 2024-2028 and support EBITDA and cash flows,” the report said.
The report said that Samruk-Energy has significantly reduced its exposure to FX fluctuations, following refinancing of a US dollar-denominated loan at Moinak HPP with local currency at the holding level as well as conversion of US dollar debt to local currency at Moinak HPP.
Concluding, Fitch's once again highlighted its key assumptions:
- Kazakhstan GDP to shrink 1.8 percent in 2020, before growing 4 percent-5.3 percent to 2024
- Inflation of 10 percent in 2020 followed by 6 percent-7.5 percent until 2024
- Electricity generation and distribution tariffs to increase in 2020 as approved by the regulator, followed by gradual below-inflation increases up to 2024
- Electricity generation volumes to decrease faster than GDP decline in 2020 due to pandemic, before recovering in line with GDP growth until 2024
- Cost increase in line or slightly below expected CPI over the next four years
- Capex averaging around 44 billion tenge ($109.4 million) annually over 2020-2024, close to management's guidance
- Dividends of 3 billion tenge ($7.4 million) in 2020 and 17 billion tenge ($42.3 million) annually on average over 2021-2024
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