Fitch affirms ratings of National Company KazMunayGaz, Kazakhstan Temir Zholy, KEGOC and Mangistau Electricity Distribution Network Company

December 21. KASE

Fitch affirms ratings of National Company KazMunayGaz, Kazakhstan Temir Zholy, KEGOC and Mangistau Electricity Distribution Network CompanyFitch has affirmed ratings of 4 Kazakh companies following a sovereign rating action.

Fitch Ratings has affirmed KazMunaiGaz National Company (NC KMG), Kazakhstan Temir Zholy (KTZ), Kazakhstan Electricity Grid Operating Company (KEGOC) and Mangistau Electricity Distribution Network Company’s (MEDNC) Long-term foreign currency Issuer Default Ratings (IDRs). A full rating breakdown is provided below.

The rating actions reflect the agency’s affirmation of Kazakhstan’s Long-term foreign and local currency IDRs at ‘BBB-‘ and ‘BBB’, respectively, and Short-term foreign currency IDR at ‘F3’ on 20 December 2010. The agency has revised the Outlooks on Kazakhstan’s Long-term foreign and local currency IDRs to Positive from Stable.

The rating actions are as follows:

KazMunaiGaz National Company (NC KMG)

Long-term foreign currency IDR: affirmed at ‘BBB-‘; Outlook Stable

Long-term local currency IDR: affirmed at ‘BBB’; Outlook Stable

Short-term foreign currency IDR: affirmed at ‘F3’

Senior unsecured rating: affirmed at ‘BBB-‘.

Kazakhstan Temir Zholy (KTZ)

Long-term foreign currency IDR: affirmed at ‘BBB-‘; Outlook Stable.

Senior unsecured rating: affirmed at ‘BBB-‘.

While NC KMG and KTZ continue to benefit from strong links with the government, full and timely financial support, which would allow continued rating alignment, is not certain without a significant portion of debt with explicit guarantees. Consequently, NC KMG and KTZ’s ratings are affirmed with a Stable Outlook.

Kazakhstan Electricity Grid Operating Company (KEGOC)

Long-term foreign currency IDR: affirmed at ‘BBB-‘; Outlook revised to Positive from Stable

Long-term local currency IDR: affirmed at ‘BBB’; Outlook revised to Positive from Stable

Short-term foreign currency IDR: affirmed at ‘F3’.

KEGOC’s ratings continue to be aligned with the sovereign’s given the state guarantees for a large part of its debt (56%). KEGOC is 100% state owned, and enjoys strong state support due to the strategic nature of Kazakhstan’s national electricity transmission grid. Fitch views KEGOC’s stand-alone business and financial profile as commensurate with a weak position within the ‘BB’ rating category.

Mangistau Electricity Distribution Network Company (MEDNC)

Long-term foreign currency IDR: affirmed at ‘BB’; Outlook Stable

Foreign currency senior unsecured rating: affirmed at ‘BB’

Short-term foreign currency IDR: affirmed at ‘B’

Long-term local currency IDR: affirmed at ‘BB+’; Outlook Stable

Local currency senior unsecured rating: affirmed at ‘BB+’

National Long-term Rating: affirmed at ‘AA-(kaz)’; Outlook Stable.

MEDNC’s ratings are linked to the sovereign’s, but notched down to reflect that little indication has been given by MEDNC’s parent, JSE Samruk-Energo (S-E: indirectly 100% state-owned) that it will provide timely financial assistance in case of need. Fitch anticipates that MEDNC’s links with the government may weaken through its eventual sale, hence MEDNC’s ratings are affirmed at Stable Outlook. Fitch views the standalone business and financial profile of MEDNC as commensurate with a weak ‘BB-‘ rating.

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