Fitch affirms ratings of KAzTransGas, Intergas Central Asia and KazTransGas Aimak, outlook "Stable"
04.09.13 10:35
/Fitch Ratings, London/Moscow, August 29, 13, Fitch Ratings English translation,
KASE headline/ – Fitch Ratings has affirmed KazTransGas JSC (KTG) and its
fully-owned subsidiaries Intergas Central Asia JSC (ICA) and KazTransGas
Aimak JSC (KTGA) Long-term Issuer Default Ratings (IDRs) at 'BB+'. The
Outlook is Stable. A full list of rating actions is below.
KTG and its subsidiaries (KTG or the group) are the state-owned monopoly
engaged in natural gas transit, transportation and distribution in Kazakhstan
(BBB+/Stable). It is the national gas operator and derives most of its profits
through the transit of Central Asian gas to Russia. The group's ratings include
a one-notch uplift for its close ties with the state-owned parent JSC National
Company KazMunayGas (NC KMG, BBB/Stable), and are constrained by high
customer concentration, evolving tariff-setting environment and increasing
leverage.
KEY RATING DRIVERS
Kazakh Gas Monopoly KTG's ratings reflect its monopoly position as the operator
of the Kazakh gas pipeline network, the only transit route for Central Asian
gas to Russia and Europe. The group is the national gas operator, which means
that it has the pre-emptive right to purchase natural gas produced in Kazakhstan
at cost plus and resell it domestically and for export. ICA, which is responsible
for trunk pipeline gas transit, generates most profits - in 2012, it accounted
for 60% of the group's consolidated EBITDA. In our rating case, we forecast
stable gas transportation volumes and tariffs for the group until at least 2017.
High Customer Concentration OAO Gazprom (BBB/Stable) is the group's key
customer, accounting for 76% of 2012 transit revenues. In 2011, Gazprom and
ICA signed a new five-year contract for 28 billion cubic meters (bcm) of
Central Asian gas. "Ship-or-pay" clauses cover 80% of negotiated transit
volumes. However, tariffs are agreed annually and may be subject to political
pressure. We believe that Gazprom's purchase volumes of Central Asian gas and
transportation tariffs will remain flat over the medium term, which will allow
the group to generate stable operating cash flows. High customer concentration
is the principal rating constraint for KTG.
Fully Regulated Tariffs The group's profitability is driven by cost-plus
domestic tariffs and regulated gas prices set by Kazakhstan's Agency for
Regulation of Natural Monopolies (AREM). We view Kazakhstan's tariff-setting
environment as developing. Historically, gas prices and transit tariffs have
been sufficient for KTG to maintain adequate profits and finance its moderate
maintenance capex. We expect this to continue under our rating case. However,
in an economic recession AREM may face political pressure to limit tariff
increases, which could force KTG to raise its leverage beyond our expectations.
Manageable Capex
We view as manageable the group's plans to upgrade the ageing gas network in
south Kazakhstan and provide gas to several Kazakh regions, including Almaty.
KTG's 2013-2017 investment programme amounts to KZT235bn and will be
partially debt-funded, but we expect the group's credit metrics to remain
commensurate with the current rating. In addition, we do not expect any
significant impact on KTG's credit metrics from the Beineu-Bozoy-Shymkent
pipeline and Line C of the Asian Gas Pipeline from Central Asia to China, which
are undertaken and financed by KTG's JVs with China National Petroleum
Corporation (CNPC, A+/Stable) and are guaranteed by CNPC and NC KMG.
Moderately Rising Leverage
At end-2012, KTG's funds from operations (FFO) adjusted gross leverage was
1.9x, and we expect it to reach about 2.7x in 2013-2017 due to KTGA's high
capex. We forecast that the group's FFO interest coverage will deteriorate to
6x, down from 10x at end-2012, which is still adequate for the current
ratings.
RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead
to positive rating action include: Customer diversification - enhancement of
the business profile through diversification of the customer base, whilst
maintaining solid credit metrics would be positive for KTG's ratings.
Negative: Future developments that may, individually or collectively, lead to
negative rating action include: Lower transit volumes - a large drop in volumes
of Central Asian gas transit with a simultaneous failure by Gazprom to honour
ship-or-pay obligation would be negative for KTG's ratings; Large capex -
aggressive capex resulting in significant and sustained deterioration of
credit metrics, including FFO gross leverage above 3x, would also be rating
negative.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity, Comfortable Repayments At 30 June 2013, KTG had KZT47bn
in cash and cash equivalents, which was sufficient to cover short-term
maturities of KZT15bn. Debt repayment is well balanced with a peak in
2017 when ICA's USD540m Eurobonds fall due.
LIST OF RATING ACTIONS
KazTransGas JSC
Long-Term IDR: affirmed at 'BB+', Outlook Stable
Local currency Long-Term IDR: affirmed at 'BB+', Outlook Stable
Short-Term IDR: affirmed at 'B'
National Long-Term rating: assigned at 'AA-(kaz), Outlook Stable
Senior unsecured Long-Term rating: assigned at 'BB+'
Senior unsecured National Long-Term rating: assigned at 'AA-(kaz)'
Intergas Central Asia JSC
Long-Term IDR: affirmed at 'BB+', Outlook Stable
Local currency Long-Term IDR: affirmed at 'BB+', Outlook Stable
Short-Term IDR: affirmed at 'B'
National Long-Term rating: assigned at 'AA-(kaz)', Outlook Stable
Senior unsecured Long-Term Rating: affirmed at 'BB+'
Senior unsecured National Long-Term rating: assigned at 'AA-(kaz)'
KazTransGas Aimak JSC
Long-Term IDR: affirmed at 'BB+', Outlook Stable
Local currency Long-Term IDR: affirmed at 'BB+', Outlook Stable
Short-Term IDR: affirmed at 'B'
National Long-Term rating: assigned at 'AA-(kaz), Outlook Stable
Senior unsecured Long-Term Rating: affirmed at 'BB+'
Senior unsecured National Long-Term rating: assigned at 'AA-(kaz)'.
Contacts:
Principal Analyst, Dmitri Marinchenko, Analyst, +7 495 956 9901
Supervisory Analyst, Maxim Edelson, Director, +7 495 956 9901
Committee Chairperson, Alex Griffiths, Senior Director, +44 20 3530 1033
Media Relations: Yulia Belskaya Von tell, Moscow,
tel.: + 7 495 956 9908/9901, julia.belskayavontell@fitchratings.com
[2013-09-04]