Fitch affirms CAEPCo at ‘B+’; Outlook Stable

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

Fitch Ratings has affirmed Kazakhstan-based Joint Stock Company Central-Asian Electric-Power Corporation’s (CAEPCo) Long-Term Issuer Default Rating at ‘B+’. The Outlook is Stable, said the rating agency.

“The ratings also reflect an unfavourable regulatory environment in the generation segment, the weak liquidity profile and significant capex needs of CAEPCo, which Fitch expects to be partially debt-funded. Positively, the ratings factor in a solid consolidated business profile, strong 1H17 financial results, vertical integration, and a stable regional market position despite its overall small size. The ratings further take into account a currently fairly benign regulatory regime in the distribution sector,” said the agency.

“CAEPCo remains significantly exposed to foreign currency fluctuations as 47% of its total debt as at 30 June 2017 was denominated in US dollars, although this share decreased from 49% at end-2016 and 54% at end-2015. This exposure might further weaken CAEPCo’s credit profile due to currency mismatch between the company’s debt and revenue and the absence of hedging. However, CAEPCo maintains a portion of cash in US dollars (21% of cash and deposits as at 30 June 2017),” reads the report.

According to the report, capex is expected to remain significant, on average, at KZT22 billion annually for 2017-2020 compared with KZT26 billion for 2013-2016. This is despite the completion of a mandatory investment programme for generation assets. Around 40% of the capex programme for 2017-2020 is discretionary and KZT7.8 billion of it will be financed by government subsidies, which the agency views positively.