Fitch raises KEGOC to "BBB", outlook "Positive"

/IRBIS, November 23, 2011/ - Fitch Ratings upgraded the following ratings of KEGOC: Long-term Issuer Default rating ("IDR") in foreign currency from "BBB-" to "BBB" and long-term local currency IDR from "BBB" to "BBB+". As stated in the report dated 22 November, at the same time the agency affirmed the Short-term IDR of the company in foreign currency at "F3". Forecast of long-term IDR - "Positive". The rating actions follow the holding of regular review of ratings of KEGOC, and also reflect the increase in Fitch's long-term IDR of Kazakhstan in foreign currency from "BBB-" to "BBB" and long- term local currency IDR from the level of "BBB" to "BBB+" November 21 2011 outlook for the sovereign long-term IDR remains "positive". As indicated, KEGOC has ratings on par with sovereign ratings of Kazakhstan due to the fact that the company is 100 percent indirect ownership of the state and has direct government guarantees for much of the debt (52%), as well as the strategic nature of electricity in Kazakhstan. Fitch considers that part of the business for which there are no guarantees, and its financial position as the corresponding low levels in the rating category "BB", which is mainly due to the financial risk associated with currency borrowings and interest rates. KEGOC entire debt is denominated in foreign currency (about 85% - in U.S. dollars and 15% in euros) and has a variable interest rate. Fitch notes that in the 2-3 quarter 2011 the company held an early repayment of two loans (denominated in tenge, fixed-rate) of the Kazakhstan Development Bank and the loan from the European Bank for Reconstruction and Development ("EBRD", "AAA"/forecast "Stable"). Loans (for a total amount equivalent to $ 83 million) were repaid with funds from the new loan the EBRD in the amount of $156 million, agreed in May 2011. The Agency believes that increasing the risks associated with the fact that the currency is the dollar borrowings, and with variable interest rates, was smoothed by increasing the sources of investment finance KEGOC (73 million). Fitch considers a violation of the covenant related to the payments as a technical point. Among the loans included in the refinancing there were no loans with guarantee from the state. Estimated to Fitch, the share of guaranteed loans may be reduced to approximately 40% of total debt in the next few years. In 2011, JSC "Sovereign Wealth Fund "Samruk-Kazyna", the direct parent of company KEGOC, continued to provide support to KEGOC and provided 600 million tenge for the project of reconstruction and improve energy efficiency in electricity in the village Osakarovka. At the same time fund SK plans to offer 5% - 15% stakes in the number of Kazakh companies, including KEGOC, the country's population in the so-called "people's IPO" in 2012-2015. Fitch expects that after the IPO SK retains a majority stake in KEGOC and that will remain state guarantees on the debt KEGOC. Fitch may revise the linkage ratings KEGOC with sovereign rating, if the share of debt with a government guarantee will be lower than expected for today and if the level of communication with the state weakened. On August 1, 2010 a new single tariff for the transmission of electricity for all users of the service replaces eight-zone tariff system. Fitch notes that a single tariff for electricity transmission, approved in 2010, is close to the mean of the previous tariff, and sees this change as a neutral for the credit. Liquidity is adequate, based on a balanced debt structure KEGOC Maturity (annual repayments of about 6 billion), available cash and deposits (23 bn at September 30, 2011), as well as irrevocable undrawn loans (68 billion tenge at the end of 2010 and about 10.6 bln on new loan from the EBRD). At the same time, their use is limited to certain capital projects, and they can not be designed to meet the liquidity requirements of a general nature. [2011-11-23]