ASTANA, Kazakhstan, February 9. Fitch Ratings has lowered QazaqGaz JSC (QG, Kazakhstan's national company)'s Long-Term Foreign- and Local-Currency Issuer Default Ratings to 'BB+' from 'BBB-', and removed the ratings from Under Criteria Observation (UCO) with stable outlook, Trend reports.
The long-term foreign currency IDRs of QG's fully owned subsidiaries, Intergas Central Asia JSC (ICA) and KazTransGas Aimak JSC (KTGA), were also downgraded to 'BB+' from 'BBB-'. The outlook is stable.
Fitch has also revised lower QG's Standalone Credit Profile (SCP) to 'b' from 'bbb-'. The downgrade to 'BB+' reflects QG's significantly deteriorated SCP, which, in combination with our assessment of QG's linkage with the state (Kazakhstan, BBB/stable), results in QG being rated two notches below the sovereign's under Fitch's recently updated Government-Related Entities (GRE) Rating Criteria. QG's support score is 32.5, which underlines'very 'likely' support from the state based on the criteria definitions.
Fitch's revision of QG's SCP reflects its drastically weakening consolidated profitability on the back of practically discontinued gas transit from Central Asia to Russia, still loss-making domestic gas tariffs, and growing domestic natural gas consumption in Kazakhstan that will constrain gas exports to China and result in increased gas imports from Russia. QG's leverage and free cash flow (FCF), however, should remain adequate given the significant dividends QG is expected to be receiving from Asia Gas Pipeline LLP (AGP), its joint venture (JV) with China National Petroleum Corporation (A+/stable).
As the Fitch noted, ICA's and KTGA's 'BB+' ratings reflect strong linkage between QG and its wholly owned subsidiaries, hence warranting the equalization of their ratings.