S&P Revised Kazakh Gas Transporter KazTransGas Outlook To Stable, 'BB' Rating Affirmed
14.05.09 11:49
/Standard & Poor's, Moscow, May 13, 09/ - Standard & Poor's Ratings Services
said today that it had revised its outlook on Kazakh energy holding KazTransGas
(KTG) and its 100% owned gas pipeline operator JSC Intergas Central Asia
(ICA)-which we equalize with that on KTG-to stable from negative. At the same
time, the 'BB' long-term corporate credit ratings on KTG and ICA were affirmed.
The outlook revision follows the outlook revision on the sovereign and on KTG's
100% parent, state-owned JSC NC KazMunayGas (KMG; BBB-/Stable/-) to
stable from negative.
"The ratings on KTG and ICA incorporate support from KMG," said Standard &
Poor's credit analyst Sergei Gorin. "The ratings on both KTG and ICA are two
notches below those on KMG, using our top-down approach."
KTG has a weak stand-alone credit quality, given its ambitious investments in
gas transmission and distribution; a weak financial profile; heavy dependence
on Russian energy giant OAO Gazprom (BBB/Negative/-); gas transit volume risk
after 2011, when the gas transit contract with Gazprom expires; potential
competition from alternative gas export pipelines transporting Central Asian
gas; and opaque retail gas tariff regulation in Kazakhstan and Georgia.
These weaknesses are mitigated to some degree by the favorable location of
ICA's transit gas pipelines between Central Asian gas producers and the
European market, strong gas demand in Europe, KTG's monopoly gas supplier
position in the service area, and a ship-or-pay transit contract with Gazprom
until 2011.
KTG has a positive track record of receiving support from KMG, including
interest - free loans, compensation for loss-making operations, sourcing of
gas for distribution operations at a favorable price under a swap agreement
between KMG and KTG's gas suppliers, and a supportive dividend policy. KTG's
strategic importance to KMG and the Kazakhstan government could justify
extraordinary support in a stress scenario, which helps alleviate KTG's
weaknesses somewhat.At the same time, timely support is not formally guaranteed.
The ratings on KTG and ICA are equalized. The consolidated approach reflects
the companies' close integration, KTG's 100% ownership of ICA and other major
subsidiaries, financial guarantees on a major part of the group's debt issued by
ICA and KTG, large intragroup cash flows, and the absence of effective
subsidiary ring fencing.
On March 31, 2009, according to management information, KTG's liquidity
reserves, equivalent to $280 million, covered debt maturities of $159 million
for the next 12 months, with large maturities in September-December 2009.
"The stable outlook reflects that on the parent," said Mr. Gorin.
The ratings could be threatened if the debt financing for KTG's potential gas
pipeline investments leads to a more aggressive financial profile, with the
funds from operations-to-debt ratio falling to less than 15%.
Should the liquidity position deteriorate due to KTG's failure to refinance its
significant debt maturities in 2009, or if KTG significantly increases its
investment plan for 2009-2010, the ratings could be lowered.
Strong parental or government support for financing new projects, through equity
increases, debt guarantees, or increased transit tariffs with Gazprom, could
mitigate the negative impact on KTG's creditworthiness.
Primary Credit Analyst:
Sergei Gorin, Moscow, 7 495 783 4132;
sergei_gorin@standardandpoors.com
Secondary Credit Analyst:
Peter Kernan, London, (44) 20-7176-3618;
peter_kernan@standardandpoors.com
Additional Contact: Infrastructure Finance Ratings Europe;
InfrastructureEurope@standardandpoors.com
[2009-05-14]