Fitch Affirms Rating Of Kazakh Samruk-Energy At ‘BB+’

Fitch assigns 'BB' IDR to Kcell JSC; Outlook Stable

Fitch Ratings has affirmed Kazakhstan-based JSC Samruk-Energy’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB+’, and foreign-currency senior unsecured rating at ‘BB’.

The outlooks on the IDRs are stable, according to Fitch Ratings.

“The affirmation reflects continued strong strategic and operational ties between the company and the Kazakh state and our expectation is that the company would refinance its $500 million eurobonds falling due in December 2017 or the government would provide timely financial support to Samruk-Energy, in case of insufficient cash inflows,” said the report released by Fitch Ratings.

Fitch views Samruk-Energy’s liquidity at end-2016 as mostly dependent on the credit facilities to fully cover the forthcoming eurobond repayment and failure by the company to secure refinancing may result in negative rating action.

The analysts believe that Samruk-Energy’s cash and deposits of 57.4 billion tenges (32.4 billion tenges of which is held at holding level) at end-2016, together with available credit facilities and privatization proceeds, are sufficient to cover short-term repayments of 193 billion tenges, including 167 billion tenges ($500 million) of maturing eurobonds at holding level.

Samruk-Energy also expects privatization proceeds of 40.5 billion tenges and has already received bids for most of this amount, according to the report.

“We continue to view the operational and strategic links between Samruk-Energy and the state as strong, which supports the application of our top-down rating approach,” said the report. “The strength of the ties is underpinned by the company’s strategic importance to the Kazakh economy as the company controls about 40 percent of total installed electricity generation capacity and 36 percent of total coal output in the country.”

On the other hand, Samruk-Energy has weaker strategic and operational ties with the state than JSC National Company KazMunayGas (BBB-/Stable) and JSC National Company Kazakhstan Temir Zholy (BBB-/Stable), and has less guaranteed debt than KEGOC (BBB-/Stable), said the analysts.

The government demonstrated its support through equity injections of around 18 billion tenges in 2016 and through lowering the interest rate in 2015 on Samruk-Kazyna’s 100 billion tenges worth loan to 1 percent from 9 percent, according to the report.