S&P has approved GAMMA rating of "National Company "KazMunaiGaz" on the level of GAMMA-4+ and withdrew it

/IRBIS, August 24, 2011/ - Governance Services Standard & Poor's has affirmed and simultaneously withdrew GAMMA score of JSC "National company "KazMunaiGas" (NC KMG) GAMMA-4 +, on a scale with gradations of ratings from 1 (low) to 10 (high), was stated in a common 23 August message of S & P. NC KMG is an integrated oil and gas company owned by JSC "National Welfare Fund "SK". As indicated, the corporate governance rating GAMMA of NC KMG has been withdrawn at the initiative of Standard & Poor's in connection with the decision of Standard & Poor's to stop providing services to evaluate corporate governance on the methodology of GAMMA. However, Standard & Poor's will continue to evaluate corporate governance in credit analysis. "We appreciate the desire of the Board and management of the company to eliminate the shortcomings of corporate governance, which restricted the level of the rating GAMMA. These include the lack of freedom of KMG in matters of strategy, as well as uncertainty about the social burden, which may be imposed on the company in the future, - said analyst Governance Services Standard & Poor's Oleg Shvyrkov. - However, it may take time to ensure that these initiatives have yielded in concrete results and corporate governance standards in the company rose". GAMMA of NC KMG is the result of four component analysis, with gradations of assessment from 1 to 10: - Shareholder influence - 4 + - Shareholder Rights - 5 - Transparency, audit and risk management - 5 + (upgraded from 5) - Board effectiveness, strategic process and incentives - 4 + Standard & Poor's notes the following advantages of corporate governance of NC KMG: - representatives of shareholders and independent directors are highly qualified and extensive experience in the industry. They provide thorough oversight of management, with decisions usually made by consensus. Independent directors owns a majority of seats in all the committees at the Board of Directors; - the company is distinguished by high level of transparency, in particular, in 2011, significantly reduce the time of disclosure. Audit of annual financial statements under IFRS of NC KMG is conducted by well-known international audit firm Ernst & Young; - All key elements of risk management systems are implemented and tested in practice. The Internal Audit Service is accountable to the Audit Committee of the Board, in its work, it uses risk-based approach; - KMG is the most valuable asset of the fund, "Samruk-Kazyna". The Kazakh government is working to improve corporate governance in companies controlled by him. Thus, at the initiative of the government and "SK" in the boards of directors of subsidiaries of the fund were introduced competent independent directors, has increased transparency of the group companies have been in place risk management procedures. At once, the analysis performed by S&P has revealed some minuses of the corporate governance system: - Kazakh government may have an impact on NC KMG, so that the company's resources used to finance projects of national importance, but are not specialized and relevant investment criteria of NC KMG. Because of this effect in the past, KMG has a significant amount on the balance of non-core assets. This load can divert management resources on core activities and hinder an assessment of management; - KMG often serves as an instrument of state policy, for example, providing a supply of petroleum products in the domestic market at affordable prices. The company's activities in Kazakhstan's oil refining sector have predominantly social orientation. KMG does not have full autonomy in determining the remuneration policy and the strategic management process; - KMG has limited autonomy in strategic planning. At the same time, "SK" and the government often find it difficult to clearly formulate a strategic vision for the company. This adversely affects the effectiveness of the strategic planning of the company; - independent directors belong to a minority of votes in the Board of Directors, and they do not have a formal veto. In 2010-2011, they participated in most meetings of the Board of Directors and its committees in absentia (by phone), according to S & P, which limits their influence on the decisions taken; - there is a number of deficiencies in information disclosure, investor relations are just beginning to develop. [2011-08-24]