Fitch affirms KazMunaiGas National Company (Kazakhstan) ratings, "Negative" outlook
07.07.09 11:48
/Fitch Ratings, London-Moscow, July 3, 09, Fitch Ratings English translation,
KASE headline/ - Fitch Ratings has today affirmed Kazakhstan-based
KazMunaiGaz National Company's (NC KMG) ratings at Long-term foreign
and local currency Issuer Default (IDR) 'BBB-' and 'BBB' respectively, senior
unsecured 'BBB-' and Short-term foreign currency IDR 'F3'. The Outlooks for
the Long-term IDRs are Negative.
According to Fitch's Parent and Subsidiary Rating Linkage methodology, NC
KMG's ratings are aligned with the sovereign ('BBB-'/'BBB'/'F3'/Negative), as
the legal, strategic and operational ties between the parent (ultimately the
state) and the group are considered to be strong. This is underpinned by the
importance of the oil and gas sector to the Kazakh economy and the
company's representation of the government's interests in this industry. It
also benefits from a favourable operating environment (eg the pre-emptive
right granted by the government to acquire interests in oil and gas assets
offered for sale in Kazakhstan and to acquire at least 50% in all new offshore
projects) and the state's support in negotiations with partners of projects
regarding their ownership and funding structures.
The ratings also reflect the group's diversified business operations as a
vertically integrated oil and gas company with access to all oil and gas
pipeline routes in the country, thus securing its export potential.
Nevertheless, despite rapid oil and gas production expansion (5% yoy in
2008), NC KMG still operates on a relatively small scale versus its Russian
and international peers, although this is somewhat mitigated by its high oil
and gas reserve replacement rate and reserve life.
With a FY08 EBITDAR margin of 38.1% and EBITDA per barrel of oil
equivalent of USD40.6, the group compares well with its Russian and
international oil and gas peers.
However, the ratings take into account NC KMG's acquisitive strategy and
aggressive capex programme of USD23.3bn over 2009-2013, which is likely
to adversely affect its leverage. The group's FY08 gross leverage of 1.66x
(excluding the Kashagan stake increase and CCEL-related obligations) was
already at the high end in the 'BBB-' peer group.
Given that the company widely uses non-recourse funding for the acquisition
of equity stakes (50% or less) and/or for investment programmes of projects
in which it owns 50% or less (eg the Kazakhstan-China oil and gas pipelines,
the West-South pipeline, etc), Fitch believes that the company's shift to the
equity accounting method from the proportionate consolidation method with
effect from 2009 will more accurately reflect its financial standing. For
example, in its analysis of KazTransOil ('BBB-'/Negative), an oil pipeline
operator in Kazakhstan, Fitch excludes non-recourse debt pertaining to the
funding of the Kazakhstan-China oil pipeline from the gross debt calculation.
Based on the equity method and Fitch's base case oil price of USD55/bbl,
the agency expects NC KMG's gross leverage to rise to about 2.8x in 2009
(excluding the Kashagan stake increase obligation).
Furthermore, Fitch notes NC KMG's exposure to the weakening Kazakh
banking system, which has been negatively impacted by the financial crisis.
As a result, Fitch has placed greater emphasis in its analysis on gross
leverage rather than net leverage and treated the USD1.3bn held by the
group and its subsidiaries at BTA Bank ('RD' - Restricted Default) as
restricted cash.
Contacts:
Angelina Valavina, London, tel.: +44 20 7682 7383
Jeffrey Woodruff, London, tel.: +44 20 7682 7322
Media Relations:
Marina Moshkina, Moscow, tel.: +7 495 956 6904/9901,
marina.moshkina@fitchratings.com
[2009-07-07]