Fitch Rates JSC National Atomic Company Kazatomprom IDR 'BB+'; Outlook Positive

/Fitch Ratings-London/Moscow, November 7, 06/ - Fitch Ratings has today assigned Kazakhstan-based uranium producer JSC National Atomic Company Kazatomprom ("Kazatomprom") an Issuer Default 'BB+' rating and a Short-term 'B' rating. The Outlook is Positive. The ratings reflect Kazatomprom's world leadership position in uranium production, its strong growth profile, its sound financials as well as the potential government support implied by its 100% government ownership. The company is the fourth largest uranium producer in the world with a 10% market share. It has the second largest low-cost uranium resource base in the world. Kazatomprom is thus uniquely positioned to leverage the recent revitalisation of the uranium industry on the back of the planned increase in the number of nuclear power plants worldwide. All these factors will help drive the company's strategy of uranium production expansion (28% compound annual growth rate ("CAGR") in 2005-2010) and of its shift to more value- added products. Kazatomprom posted a strong 33% CAGR in revenue during 2003-2005. Fitch views that the company will be able to maintain this impressive performance on the back of solid industry fundamentals, low cost production and changes in the product mix. However, the agency acknowledges that Kazatomprom operates on a much smaller scale compared to its rated metals and mining peers. Moreover, its limited product diversification increases its exposure to uranium industry risks. Kazatomprom is moderately leveraged compared to many of its rated metals and mining peers, with total debt of KZT32.2 billion at FY05 although the bulk of it (KZT19.2bn) is held as term deposits. The company is restructuring its debt to lengthen the maturity profile. As a result, the share of short-term debt declined to 37.6% in 2005 from 86.3% in 2004. In Fitch's view, as a fully government-owned entity, the company enjoys an implicit government guarantee, which is reflected in its strategic importance for the country, its track record of government support as well as the composition of the board of directors (five out of six members are from government-related agencies). However, the current shareholding structure implies that Kazatomprom is subject to the risks associated with the Kazakh government, mostly political. Furthermore, with the uranium industry highly regulated both on a national and an international level, the company's decision-making process can be constrained by regulatory requirements such as permit grants. The Positive Outlook reflects the favorable fundamentals of the uranium industry as well as Fitch's expectations that Kazatomprom will continue its rapid expansion while maintaining its strong credit and financial profiles. Contacts: Angelina Valavina, London, Tel: +44 (0)20 7417 6270; Peter Archbold, +44 (0)20 7417 6334. Media Relations: Julian Dennison, London, Tel: +44 20 7862 4080; Alla Izmailova, Moscow, Tel: +7 495 956 9903. [2006-11-07]