Baku, Azerbaijan, May 23
By Elena Kosolapova - Trend:
The international ratings agency Fitch Ratings has downgraded the national scale ratings of seven Kazakh companies - JSC National Company Kazakhstan Engineering, JSC Samruk-Energy, JSC Mangistau Electricity Distribution Company (MEDNC), JSC KazTransOil (KTO), KazTransGas JSC (KTG), Intergas Central Asia JSC (ICA) and KazTransGas Aimak JSC (KTGA), said the agency May 23.
The downgrades reflect a recalibration of the Kazakh national scale, which followed the recent downgrading of the Kazakh sovereign rating. The rating actions also follow the recent downgrade of international scale ratings of several Kazakh companies. The core rationale for these rating actions is the direct impact of the sovereign downgrade on the ratings of state-owned entities.
Long term national rating of Kazakhstan Engineering downgraded to 'AA(kaz)' from 'AA+(kaz)'; Outlook Stable.
Fitch continues to view the operational and strategic links between Kazakhstan Engineering (KE) and the state as moderate to strong, which supports the application of the top-down rating approach. 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.
Long-term national rating of JSC Samruk-Energy downgraded to 'AA(kaz)' from 'AA+(kaz)'; Outlook Stable.
Fitch applies a two-notch differential between the long-term IDR of Samruk-Energy and the state. The agency continues to view the operational and strategic links between Samruk-Energy and ultimately the state as strong, which supports the application of the top-down rating approach.
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.
Long-term national rating of JSC Mangistau Electricity Distribution Company (MEDNC) downgraded to 'A+(kaz)' from 'AA(kaz)'; Outlook Negative.
MEDNC's ratings are currently notched down three levels from the sovereign's, reflecting moderately strong links between the company and its ultimate parent.
The negative outlook reflects Fitch's 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.
Long-term national rating of JSC KazTransOil (KTO) downgraded to 'AA+(kaz)' from 'AAA(kaz)'; Outlook Stable.
KTO's ratings are capped by those of JSC National Company KazMunayGas (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.
Long-term national ratings of KazTransGas JSC (KTG) and its subsidiaries downgraded to 'AA(kaz)' from 'AA+(kaz)'; Outlook Stable.
KTG's ratings are notched down one level from NC KMG's ratings. KTG and Intergas Central Asia JSC (ICA) qualify as material subsidiaries in NC KMG's eurobonds and are subject to cross-default provisions, but NC KMG does not guarantee their debt.
Fitch views the intra-group links between KTG, ICA and KazTransGas Aimak JSC (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.
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