Moody's published comments on credit ratings of Atyrau oblast of Kazakhstan

/IRBIS, July 15, 02, REUTERS and Moody's Investors Service release/ - On July 11 the international rating agency Moody's Investors Service published new report on Atyrau oblast of Kazakhstan that concerns its creditability as an issuer. Extracts from this report were published by REUTERS agency on the last Thursday. Below IRBIS agency presents the original announcement that was published by REUTERS agency on the grounds of Moody's Investors Service press release. MOODY'S REPORTS ON OBLAST OF ATYRAU, KAZAKHSTAN (Press release provided by Moody's Investors Service) NEW YORK, July 11 - The Oblast of Atyrau's B1 issuer rating, with positive outlook, reflects the region's strong economic potential, the administration's low debt levels and large operating surpluses, Moody's Investors Service says in a new credit report on the Kazakh region. However, the rating also takes into account the negative impact of the current 'withdrawal system', the large infrastructure requirements of the region and the lack of stability in intergovernmental budgetary relations, Moody's adds. Atyrau's economy is based on its wealth of natural resources, with the region producing 44% of Kazakhstan's oil and 51% of its gas. Significantly, Moody's expects several recent developments - most notably the Agip KCO offshore oil project - to lead to sizeable investments in the local economy. Until 2002, the Oblast of Atyrau's revenue base was highly dependent on a single industry, with fuel-related companies accounting for 90% of tax revenues in 2001. "However, following recent reforms, the region's budget will be less closely tied to oil prices as it no longer receives any corporate tax revenues," explains Elisabeth Rudman, Vice President/Senior Analyst and a co-author of the report. Nonetheless, the fuel industry remains the backbone of the region's economy and its profitability will continue to impact local revenues, the report notes. As a result of the budgetary system changes in question, 100% of corporate tax revenues in all of Kazakhstan's regions will now be paid to the central government. To compensate the regions for this revenue loss, they will be entitled to retain all excise revenues and will receive increased central government transfers; in addition, the 'withdrawal' payments - by which richer regions subsidise the poorer ones - will be reduced. "The overall result of the reforms will be to make the Oblast of Atyrau more dependent on the central government, while own-source revenues are expected to be lower going forwards," Rudman notes. The central government restricts all regions' borrowings, which are limited to the financing of capital expenditure. Certain restrictions were lifted in 1999 and Atyrau's borrowings have risen somewhat as a result. Although these levels remain low, the region's budget flexibility is significantly reduced due to the withdrawal payments it makes, Moody's notes. Nonetheless, the rating agency expects debt service levels to remain manageable. The Oblast of Atyrau is situated in western Kazakhstan on the north coast of the Caspian Sea. It has approximately 446,000 inhabitants, accounting for 3% of Kazakhstan's population. The issuance of this credit report by Moody's Investors Service is an annual update to the markets and is not a formal action to alter the credit rating of the issuer. [2002-07-15]