Baku, Azerbaijan, May 9
By Elena Kosolapova - Trend:
Fitch Ratings has downgraded the ratings of Kazakh companies - JSC National Company Kazakhstan Engineering, Kazakhstan Electricity Grid Operating Company (KEGOC), JSC Samruk-Energy, JSC Mangistau Electricity Distribution Company, JSC National Company Kazakhstan Temir Zholy, JSC National Company KazMunayGas, JSC KazTransOil, KazTransGas JSC, the agency said May 6.
JSC National Company Kazakhstan Engineering (Long-term Foreign Currency IDR downgraded to 'BB+' from 'BBB-'; Outlook Stable).
The agency continues to view the operational and strategic links between Kazakhstan Engineering (KE) and the state as moderate to strong.
The strength of these ties is underpinned by the state control, strategic importance of the company to the government's ambition to expand the country's industrial base and diversify the national economy as well as the tangible financial support from the state that has already been exhibited and pledged.
The two-notch differential reflects the lack of debt guarantees provided by the state and the slightly lower priority Kazakhstan Engineering would likely receive compared with key natural resources, utilities or infrastructure companies.
Kazakhstan Electricity Grid Operating Company (KEGOC; Long-term Foreign Currency IDR downgraded to 'BBB' from 'BBB+'; Outlook Negative).
The ratings continue to reflect overall strong links with the government, albeit with weakening legal ties. We expect timely support in case of need, including should financial covenants need to be waived or renegotiated.
The Negative Outlook reflects our view of weakening support of KEGOC by its dominant, indirect shareholder - the Republic of Kazakhstan, especially in light of a decline in the share of state-guaranteed debt and high dividend payout policy following its partial IPO.
JSC Samruk-Energy (Long-term Foreign Currency IDR downgraded to 'BB+' from 'BBB-'; Outlook Stable).
The agency continues to view the operational and strategic links between Samruk-Energy and ultimately the state as strong. The strength of these ties is underpinned by the company's strategic importance to the Kazakh economy as the company controls about 39.8 percent of total installed electricity generation capacity and 35.6 percent of total coal output in the country.
JSC Mangistau Electricity Distribution Company (MEDNC; Long-term Foreign Currency IDR downgraded to 'BB' from 'BB+'; Outlook Negative).
The Negative Outlook reflects our assessment of weakening ties between MEDNC and its ultimate parent, Kazakhstan. This is due to the planned sale of the full 75 percent stake owned by 100 percent state-owned JSC Samruk-Energy (BB+/Stable) in MEDNC over the medium term as well as expected material deterioration of the company's credit metrics over 2015-2018 due to debt-funded large capex imposed by the state.
JSC National Company Kazakhstan Temir Zholy (KTZ; Long-term Foreign Currency IDR downgraded to 'BBB-' from 'BBB'; Outlook Stable).
Fitch believes the state would provide sufficient tangible support for KTZ to repay or service its liabilities, despite rapid deterioration of KTZ's standalone creditworthiness.
The Stable Outlook reflects our view of continued state support and alleviated liquidity pressure.
JSC National Company KazMunayGas (NC KMG; Long-term Foreign Currency IDR downgraded to 'BBB-' from 'BBB'; Outlook Stable).
The agency maintains a one-notch difference between Kazakhstan and NC KMG's ratings, given the absence of an explicit state guarantee for a significant portion of NC KMG's debt and based on our expectation that the state will provide sufficient and timely tangible support to NC KMG when needed.
JSC KazTransOil (KTO; Long-term FC IDR downgraded to 'BBB-' from 'BBB'; Outlook Stable).
KTO's ratings are capped by those of NC KMG, its majority shareholder, due to the parent's significant influence over KTO's free cash flow (FCF) through dividends. KTO's dividend payout has been relatively high historically, from 66 percent to 231 percent in 2011-2014.
KazTransGas JSC (KTG) and subsidiaries (Long-term Foreign Currency IDR downgraded to 'BB+' from 'BBB-'; Outlook Stable).
KTG's ratings are notched down one level from NC KMG's ratings. KTG, Intergas Central Asia JSC (ICA) and KazTransGas Aimak JSC (KTGA), qualify as material subsidiaries in NC KMG's Eurobonds and are subject to cross-default provisions, but NC KMG does not guarantee their debt.
The agency views the intra-group links among KTG, ICA and KTGA as strong and hence align the ratings of the two subsidiaries with KTG's. The evidence of strong linkage includes KTG's financial guarantees to KTGA, operational interdependence and a common planning and budgeting process between the companies.