STANDARD & POOR'S ASSIGNED LONG-TERM "BB" RATING TO KAZTRANSOIL
05.06.01 00:00
/IRBIS, June 5, 01/ - REUTERS informs that international rating agency
Standard & Poor's assigned long-term corporate credit ratings "BB" for local
and foreign currency borrowings to the Kazakhstani KazTransOil, with
"stable" forecast.
It is said that the rating of KazTransOil, where the state has 100% stake,
reflects the company's status of an operator of the most of the oil pipelines
in Kazakhstan and its role in the development of the country's fast growing oil
sector.
Rating also reflects the stable condition of the company, is said.
Following is a full text of the message.
LONDON, June 5 - Standard & Poor's today assigned its double-'B' long-
term local and foreign currency corporate credit ratings to Kazakhstan-based
oil transportation company KazTransOil (KTO). The outlook is stable.
The ratings on KTO, a 100% state-owned entity, reflect its status as the
operator of the majority of Kazakhstan's oil pipeline infrastructure and its
important role in the development of the country's growing oil reserves. The
ratings are strengthened by the company's robust financial profile, reflecting
the supportive nature of the Government's regulatory environment toward
KTO. Despite such support, however, the ratings may vary independently
from the Sovereign ratings of the Republic of Kazakhstan (local currency:
BB+/Stable/B; foreign currency: BB/Stable/B).
The ratings are offset at this level by KTO's exposure to Kazakhstan's oil
production profile, the financial health of producers in Kazakhstan, and its
dependence on neighboring Russia for pipeline access to export markets.
International crude oil prices and Russia's political risks are, therefore, key
rating determinants, over which KTO has no control.
The rating also reflects KTO's diminishing role in the export of Kazakhstan's
crude oil production, following final launch of the Caspian Pipeline
Consortium (CPC) project later in the year. However, despite a forecast cut
in tariffs from September 2001, Standard & Poor's expects that the financial
impact of the increased export route competition on KTO will be limited, with
strong domestic transportation volume growth offsetting export volume
reduction.
KTO's financial performance is inseparably linked with that of the
Kazakhstan economy, with strong revenues at the time of high crude prices
and vice versa. The profitability of the company is dependent on the ability of
the regulated tariff structure to pass through costs and to provide a return on
operational assets. The rating assumes that KTO will continue to maintain a
strong balance sheet over the next five years, with total debt to total
capitalization not rising above 20%. KTO's aging pipeline network, however,
is in need of refurbishment costing up to $300 million over the next five
years, which KTO intends to fund in part through a bond issue in the
international capital markets. Despite the associated increase in interest
expense, Standard & Poor's expects cash flow interest coverage to remain
above a strong 7.5 times over the same period.
KTO is expected to become one of five wholly-owned subsidiaries of a newly
created holding company- -the National Company of Transportation of Oil
and Gas--by mid-2001. The rating assumes that KTO's financial position will
not be weakened by the other subsidiaries in the consolidated group.
OUTLOOK: STABLE The outlook reflects Standard & Poor's expectations
that KTO will offset increasing competition from the Caspian Pipeline
Company (CPC) project and from lower tariffs through the transportation of
larger volumes of oil. The rating will come under pressure at this level if the
company is unable to maintain a strong financial profile, Standard & Poor's
said.