Fitch upgrades JSC National Atomic Company Kazatomprom to 'BBB-'; outlook Stable

/Fitch Ratings, London/Moscow, March 17, 08/ - Fitch Ratings has today upgraded Kazakhstan-based JSC National Atomic Company Kazatomprom's (Kazatomprom) Long-term foreign currency Issuer Default rating (IDR) to 'BBB-' (BBB minus) from 'BB+' and Short-term IDR to 'F3' from 'B'. The Outlook for the Long-term rating has been changed to Stable from Positive. The upgrade was driven by the strong financial profile of the company, delivery of operational results in line with previous forecasts and its strong position in the world uranium market. The ratings take into account the fact that Kazatomprom increased its revenue by 71% in 2006, whilst maintaining solid credit metrics, and despite the implementation of a very aggressive expansion programme. The company is well positioned, compared to its mining and energy peers involved in nuclear power, having both high profitability (FY06 EBITDAR margin: 27.9%) and low leverage (FY06 net leverage: 0.2x). In Fitch's view, the company's goal - to be involved in all stages of the nuclear fuel cycle and thus increase its share of value-added processes - will underpin future profitability and growth. In this respect, Fitch considers the acquisition of a 10% stake in Westinghouse Electric Company LLC (Westinghouse) by Kazatomprom in October 2007 as a positive strategic move for the latter, as it enables Kazatomprom to gain access for fuel deliveries to the power plants designed by Westinghouse. Despite an anticipated increase in debt necessary for financing the strategy's implementation, Fitch expects net leverage to remain below 1.0x in 2007-2010. The ratings also factor in the company's ability to deliver operational results in line with the production expansion schedule. Fitch believes that further uranium output growth is feasible, due to Kazatomprom's large reserve base, and a resurgence of nuclear activity globally. However, Fitch notes certain risks inherent in the rapid expansion strategy, including cost overruns, delays and high capex intensity, the potential negative impact of which could be amplified by Kazatomprom's current limited scale of operations. Furthermore, the agency notes limited diversification of business risk and high levels of commodity risk to uranium prices (which have been historically volatile). Fitch believes, however, that favourable industry trends, as well as the company's goal to shift to production of more value-added products, may mitigate these risks. The Stable Outlook reflects a balance of risks inherent in the implementation of the company's growth strategy. Kazatomprom is Kazakhstan's national uranium operator. It is 100%-owned by the Kazakh government through the Ministry of Energy and Mineral Resources (MEMR). Kazatomprom is involved in uranium, beryllium and tantalum production, as well as in electricity production (MAEK- Kazatomprom). Contact: Angelina Valavina, London, Tel: +44 (0)20 7682 7383; Andrew Steel, +44 (0)20 7862 4086. Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364; Alla Izmailova, Moscow, Tel: +7 495 956 9903 [2008-03-17]