Fitch Upgrades KazTransGas to 'BB+', Affirms JSC Intergas Central Asia at 'BB+'; Outlooks Stable
19.09.11 15:38
/IRBIS, September 19, 2011/ - Fitch Ratings has upgraded
Kazakhstan-based KazTransGas's (KTG) Long-term foreign and
local currency Issuer Default Ratings (IDRs) to 'BB+' from 'BB' and
affirmed its Short-term IDR at 'B'. The Outlooks for the Long-term
IDRs are Stable.
The agency has simultaneously affirmed JSC Intergas Central
Asia's (ICA) Long-term foreign and local currency IDRs at 'BB+', its
senior unsecured rating at 'BB+' and its Short-term IDR at 'B'. The
Outlooks for the Long-term IDRs are Stable. Intergas Finance
B.V.'s senior unsecured issues have also been affirmed at 'BB+'.
As stated, the upgrade of KTG's ratings reflects its diminishing
structural subordination through diversification of the group's
operations into gas sales as well as an improvement of its financial
profile, which became stronger than that of its 100%-owned
subsidiary - ICA in 2010. Fitch expects KTG's business profile to
be enhanced by the government's plans to transform it into the
national gas operator, enabling the company to purchase gas from
domestic gas producers and sell it on the local market and for
export and thus to capitalise on attractive economics of export
sales. Gas sales accounted for 61.9% of KTG's H111 revenue
(47.8% in 2010) whereas the share of gas transportation services
dropped to 36% (51.5% in 2010). Fitch expects this composition of
the company's revenue to prevail in the medium term.
It was known that KTG and ICA's ratings incorporate the
companies' solid credit metrics, which were underpinned in 2009-
2010 by the fact that OAO Gazprom ('BBB'/Positive), ICA's main
counterparty, honoured its ship-or-pay obligations under the
Central Asian gas transit contract, despite a drop in actual volumes
of gas transit. The companies benefited from solid cash flow
generation, positive free cash flow and improvement in leverage-
related ratios in 2009-2010.
Fitch forecasts some deterioration of ICA/KTG's financial profile in
2011-2012 due to the terms of the new five-year agreement with
OAO Gazprom for Turkmen gas transit, which retains a ship-or-pay
provision covering 80% of contracted volumes but stipulates lower
volumes of Turkmen gas transit compared to the previous contract.
However, Fitch expects KTG's financial profile to remain stronger
than ICA's given the business diversification of the former and
anticipates that the financials of both companies will remain
commensurate with their rating level. The agency forecasts KTG's
FFO adjusted leverage to slightly increase to about 1.3x-1.4x in
2011-2012 (1.26x in 2010) but anticipates a more sizable increase
of ICA's FFO adjusted leverage to above 2x in 2011-2012 (1.6x in
2010).
Fitch views KTG/ICA's liquidity position as adequate. Debt
repayment schedules are well balanced with a repayment peak in
2011 as ICA's Eurobonds for USD178.9m fall due in November
2011. Both companies' cash positions at end-2010 and at end-
H111 were sufficient to cover their short-term obligations.
Fitch believes that the planned capex programmes of both
companies are manageable. KTG and ICA were able to cover their
investment needs from internally generated cash flows during the
past three years. Fitch does not expect any material impact on the
group's credit metrics from the execution of two pipeline projects
(eg the West-South gas pipeline and the Kazakhstan-China gas
pipeline), which are being undertaken by the JVs between KTG
and a Chinese counterparty, due to their planned financing
arrangements at the JV level.
In addition, the ratings of KTG, ultimately state-owned, and ICA
reflect ICA's position as the monopoly operator of the gas pipeline
network in Kazakhstan, which remains the only feasible route for
transit of Central Asian gas to Russia and further to Europe.
Fitch rates KTG and ICA on a standalone basis in accordance with
Fitch's Parent and Subsidiary Rating Linkage methodology.
[2011-09-19]