Fitch assigns final rating to Samruk-Energy (Kazakhstan) Eurobonds at "BBB-"
20.12.12 10:47
/Fitch Ratings, London-Moscow, December 19, 12, Fitch Ratings English
translation, KASE headline/ - Fitch Ratings has assigned Kazakhstan-
based JSC Samruk-Energy's 3.75% USD500m notes due 20 December 2017
a final foreign currency senior unsecured rating of 'BBB-'. A full
list of Samruk-Energy's ratings is below.
Fitch has notched the final foreign currency senior unsecured rating down
by one notch from Samruk-Energy's Long-term foreign currency Issuer Default
Rating (IDR) of 'BBB' due to the structural and contractual subordination in
the group's debt structure. Secured and prior-ranking debt at the operating
company level constituted 61% of group debt (based on IFRS accounts' treatment
of shareholder loans) and materially exceeded 2x group EBITDA at end-2011.
Future senior unsecured debt raised at the Samruk-Energy holding company
level is expected to be subordinated to other prior-ranking creditors within
the group.
Fitch will monitor the company's planned progress in raising senior unsecured
debt and repayment of this prior-ranking debt, thereby reducing the degree of
subordination at the holding company level.
KEY DRIVERS
-Notching Down From Sovereign
Samruk-Energy's Long-term IDRs have been notched down from the Kazakh
sovereign's ratings ('BBB+'/Stable) by one notch as Fitch considers the
legal, operational and strategic ties between the state (Samruk-Energy's
ultimate parent) and the group as strong, according to the agency's Parent
and Subsidiary Rating Linkage methodology.
The strength of the ties between Samruk-Energy and the state is determined
by the ultimate state ownership of the company through JSC Sovereign Wealth
Fund "Samruk-Kazyna", the company's strategic importance for the Kazakh
economy, state guarantees for its debt and equity injections provided by
the state for the group's capex projects. Fitch assesses Samruk-Energy's
standalone business and financial profile to be commensurate with a weak
'BB' rating category compared to its Russian and Kazakh peers.
-State Support
The state (primarily through Samruk-Kazyna) provided guarantees for 43%
of Samruk-Energy's debt at end-H112. Other forms of tangible state support
include asset contributions of KZT126.6bn and an equity injection of KZT89bn
over 2009-2011. The government usually makes equity injections into Samruk-
Energy, which redistributes the funds among its operating companies.
-Vertical Integration
Samruk-Energy's standalone ratings benefit from its vertical integration,
with activities ranging from coal mining to generation and transmission and
distribution of power and heat. Fitch expects the generation segment to remain
the main cash flow driver for the group. It accounted for 60.8% of the company's
EBITDA (based on proportionate consolidation method) in H112 followed by coal
mining (24.7%) and transmission and distribution (14.7%).
-Negative Free Cash Flow
Fitch expects the group to continue generating solid and stable cash flow over
2012-16 due to volumes and tariff rise as well as stable dividends flow from the
JVs. Fitch forecasts that Samruk-Energy will remain free cash flow negative over
2012-15 due to an intensive investment programme and introduction of dividend
payments to its sole shareholder. Although Samruk-Kazyna plans to pursue a
balanced dividend policy towards its subsidiaries, which will incorporate
their investment needs, Samruk-Energy intends to pay 20% to 40% of net income
as dividends over 2012-15. The agency expects the group's FFO gross adjusted
leverage (based on the equity accounting method) to stay above 3x over 2012-
15.
RATING SENSITIVITY ANALYSIS
Positive: Future developments that could lead to positive rating actions include:
- Positive sovereign rating action
- Increase of the level of state support (eg state guarantees for a larger portion
of the company's debt)
- Material reduction in the structural and contractual subordination in the
group's debt structure could be positive for its foreign currency senior unsecured
rating
Negative: Future developments that could lead to negative rating action include:
- Negative sovereign rating action
- Diminishing level of state support
LIQUIDITY & DEBT STRUCTURE
-Adequate Liquidity
Samruk-Energy's cash position of KZT42.6bn at end-9M12 was sufficient to
cover the group's short-term debt of KZT13bn. The group's debt repayment
schedule over 2012-15 is not onerous and is relatively balanced. Its debt
maturity profile is well balanced, reflecting the long-term nature of the
company's investments.
-Cash at Local Banks
Almost all of the group's cash position is held at the local banks. While the
Kazakh banking system has recently stabilised after having been hit by the
global financial crisis, Fitch believes that the immediate and unlimited access
to deposits at local banks may not be fully exercised.
FULL LIST OF RATINGS
Long-term foreign currency Issuer Default Rating (IDR): 'BBB', Stable Outlook
Long-term local currency IDR: 'BBB+', Stable Outlook
Short-term foreign currency IDR: 'F3'
Long-term National rating: 'AAA(kaz)', Stable Outlook
Foreign currency senior unsecured rating: 'BBB-'
Local currency senior unsecured rating: 'BBB'
National senior unsecured rating: AA+(kaz).
Contacts:
Principal Analyst, Oxana Zguralska, Associate Director +7 495 956 70 99
Supervisory Analyst, Angelina Valavina, Senior Director +44 20 3530 1314
Fitch Ratings Limited 30, North Collonade, London E14 5GN
Committee Chair, Raymond Hill, Senior Director +44 20 3530 1079
Media contacts:
Julia Belskaya von Tell, Moscow, tel.: + 7 495 956 9908/9901,
julia.belskayavontell@fitchratings.com
[2012-12-20]