BAKU, Azerbaijan, Nov. 12
By Nargiz Sadikhova - Trend:
Fitch Ratings has affirmed JSC KazTransOil's (KTO) Long-Term Issuer Default Rating (IDR) at 'BBB-' with Stable Outlook, Trend reports citing the Fitch.
“We assess KTO's Standalone Credit Profile (SCP) at 'BBB', reflecting a solid business profile as a national operator of oil pipelines in Kazakhstan, fairly stable cash flow generation despite a less predictable regulatory framework than European peers' and a strong financial profile,” the report said.
Fitch also forecasts KTO's transportation volumes to moderately declining around 5 percent year-on-year in 2020 (5 percent year-on-year decline for 9M20) due to coronavirus and lower oil production. KTO is not directly exposed to oil prices, which is positive for the business profile. In addition, the lack of a debt burden supports our expectation of strong credit metrics, the report said.
The business profile of KTO is underpinned by its dominant position as a national operator of oil pipelines in Kazakhstan (BBB/Stable), as well as its strategic importance to the country's economy.
“KTO's transportation volumes are generally stable and the company is exposed to a limited volume risk depending on production at Kazakhstan's brownfields and expected redirection of transport volumes from export to domestic directions,” the report said.
KTO's 'BBB' SCP is supported by solid business and strong financial profiles and incorporates the risks pertaining to the regulatory framework and general operating environment in Kazakhstan.
KTO's dividend pay-out ratio exceeded 100 percent on average over 2014-2020, and Fitch expects significant dividend payment to continue, given the company's strong cash-generative profile.
“We expect annual Capex to be around KZT55 billion as KTO has no plans for major expansion projects. FCF could be slightly negative, depending on the level of dividends. However, we expect KTO to maintain a conservative financial profile, with no or limited balance-sheet debt,” the report said.
Fitch expects KTO's export volumes to decrease due to depletion in some fields in the central part of Kazakhstan and rising production at Kashagan, the country's largest greenfield, which uses an alternative route for crude oil exports (Caspian Pipeline Consortium, CPC).
“However, this trend will not weaken the company's business profile as lower exports should be offset by marginally higher domestic volumes, possibly from 2021-2022 following a recovery in demand for oil refining products post-coronavirus,” the report said.
KTO also benefits from its arrangements with Russian companies to transit Russian crude to China and Uzbekistan through Kazakhstan.
“Rosneft volumes through Kazakhstan to China has reached around 10 million tons per year over 2018-2020. As a national operator, KTO holds a monopolistic position in domestic oil transportation. In 2019, it transported around 40 percent of the crude oil produced in Kazakhstan, excluding the volumes carried by its two JVs with state-controlled Chinese companies, which operate the major part of the Kazakhstan-China oil pipeline,” the report said.
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