S&P confirmed Kaztransoil's long-term ratings

/REUTERS, Moscow, December 18, 02/ - International rating agency Standard & Poor's confirmed long-term corporate credit and senior unsecured debt ratings of Kaztransoil on the level "ВВ", says the message of S&P. Ratings' outlook is stable. Decision of S&P reflects the agency's opinion that the negative effect of a merger of Kaztransoil and KazTransGas with the potentially financially weaker state-owned company Kazakhoil in the KazMunaiGas group in 2002 is offset by the strategic importance of Kaztransoil for the group and the close integration of KMG with the Kazakhstan government. Below is the text of the message of S&P in English: (The following statement was released by the ratings agency). LONDON, Dec 18 - Standard & Poor's Ratings Services said today it affirmed its 'BB' long-term corporate credit and senior unsecured debt ratings on the Kazakhstan-based KazTransOil (KTO). At the same time, the ratings were removed from CreditWatch, where they were placed on Feb. 25, 2002. The outlook is stable. The rating action reflects Standard & Poor's opinion that the negative effect of a merger of KTO and KazTransGas with the potentially financially weaker state-owned company Kazakhoil in the KazMunaiGas group (KMG) in 2002 is offset by the strategic importance of KTO for KMG and the close integration of KMG with the Kazakhstan government. The ratings on KTO reflect its high operational dependence on the Russian monopoly pipeline operator OAO AK Transneft (BB/Stable/--), and its diminishing role in the export of Kazakhstan's crude oil following the launch of the Caspian Pipeline Consortium (CPC) project in 2001. Large investment in KTO's infrastructure is also required, and the company is subject to the constraints of operating within an emerging economy. These risks are offset at this rating level by KTO's status as the major operator of Kazakhstan's oil pipelines, supportive regulation, its strategic importance to KMG, and its robust financial profile. In Standard & Poor's view KMG is closely integrated with the Republic of Kazakhstan (local currency BB+/Positive/B; foreign currency BB/Positive/B), and therefore might expect some direct or indirect support. The ratings on KTO are not aligned with those on the sovereign, however. "The stable outlook reflects Standard & Poor's expectation that KTO will remain Kazakhstan's major oil transportation facility in the medium term and, despite competition from CPC, the company will at least maintain its current scale of operations while its financial profile remains strong," said Standard & Poor's Infrastructure Finance credit analyst Mikhail Galkin. [2002-12-18]