BAKU, Azerbaijan, Sept.24
By Nargiz Sadikhova - Trend:
Fitch Ratings has assigned National Company KazMunayGas's JSC (KMG) proposed Eurobonds an expected senior unsecured 'BBB-(EXP)' rating, Trend reports with reference to the Fitch.
Its Long-Term Issuer Default Rating (IDR) has been affirmed at 'BBB-' with a Stable Outlook.
The new bond will rank pari passu with senior unsecured debt. The proceeds from the bonds will re-finance Eurobonds due in 2022 and 2023. The final rating is contingent upon receipt of final documentation confirming the information already received and detail regarding the amount and tenor of bonds.
“We forecast an increase in funds from operations (FFO) net leverage to 5.8 times in 2020 from 2.3 times in 2019 due to the effects of the COVID-19 pandemic and a price war in the oil market. Based on our price deck we expect a sharp recovery from 2021, which we expect will have a positive impact on cash generation and leverage,” the Fitch said.
Fitch assesses NC KMG's Standalone Credit Profile (SCP) at 'bb-' but the deterioration in credit metrics in 2020 and a lack of deleveraging from 2021 may result in a downward revision of the SCP.
Impact of KTG Transfer Uncertain as in June 2020 NC KMG proposed the transfer of JSC KazTransGas (KTG) to be directly under JSC Sovereign Wealth Fund Samruk-Kazyna (Samruk-Kazyna; BBB/Stable) management.
Fitch projects NC KMG's FFO leverage to average 4.6x on a gross basis and 3.4x on a net basis in 2021-2023.
Kashagan Stake Buyback Timing Uncertain: NC KMG has a call option with Samruk-Kazyna to buy back the former's stake in the giant Kashagan oilfield (KMG Kashagan B.V.) until 2022. However, the stake in Kashagan is currently frozen by a Dutch court under arbitration, which makes the timing uncertain.
“The 8.44 percent stake was purchased by Samruk-Kazyna for USD4.7 billion, of which a $2.7 billion-equivalent was provided as a local-currency debt, in 2015 to provide NC KMG headroom under its debt covenants. We view this call extension as an example of state support to NC KMG and expect flexibility in the future,” the report said.
Mega Projects to Boost Volumes: NC KMG has stakes in the three internationally developed giant upstream projects in Kazakhstan: Tengiz, Karachaganak, and Kashagan.
“Muted Outlook for Dividend Inflow: We forecast moderate dividends from NC KMG's equity affiliates in 2020-2023. This is lower than our previous forecast and far lower than the $2.4 billion per annum in 2012-2014, ie before the oil price collapse,” the report said.
“We expect no dividends from Kashagan in 2020-2022 as KMG Kashagan B.V., KMG's 50 percent associate with a 16.88 percent interest in the project, will use its FCF to repay an approximately $1.5 billion long-term oil prepayment that we view as debt. We estimate that dividends received by NC KMG should grow significantly around 2022-2023, due to higher payments from TCO unless oil prices remain low,” the Fitch said.
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