S&P offers Kazakhstan to increase state companies' effectiveness

/REUTERS, Almaty, Oljas Auezov, February 18, 03/ - Rating agency Standard & Poor's warned Kazakhstan state companies it will not automatically upgrade their ratings in case of improvement of Kazakhstan sovereign estimation, and called the country's authorities to increase national companies' effectiveness of management and transparency. Report of S&P, which was published on Monday's morning, says about operator of electronic networks KEGOC, railway monopoly Kazakhstan temir zholy and companies of oil and gas holding Kazmunaigas. "The necessary condition for infrastructure companies' ratings upgrade should be considered first of all as decrease of country's risks, including improvement of institutional system, system of tariff regulation, and also system of state property management", - S&P writes. "At the same time sovereign rating may be upgraded as the result of consolidation of the central government's financial position, whereas level of country's risks may still remain high, keeping national borrowers' solvency ", - the documents says. Kazakhstan, external assets of which exceed $5.5 bn whereas the volume of Government's debt is about $2.9 bn, in autumn of last year received investment rating from Moody's agency. S&P agency in June of 2002 assigned the republic rating lower by one degree than investment one - "BB+" with positive outlook. KEGOC and Kazakhstan temir zholy have ratings, which are lower than - "ВВ" with positive outlook; oil transportation Kaztransoil and gas pipelines operator Kaztransgas, which are a part of Kazmunaigas - "ВВ" with stable outlook. The agency believes that, despite stable market positions, good perspectives of growth, which are based on quick rates of the national economics development, and low debt load, solvency of the mentioned state companies is prevented by high dependence on economics of Russia and its economics, out of date production base and insufficient transparency of tariff regulation. S&P also points to frequent transference of management and restructuring, assuming that they are made "most likely on political motives, and not in order to improve effectiveness". "Whereas in order to decrease dependence on Russian economics... and modernization of production base... in all probability, will require several years, two other factors, which limit ratings, can be removed more quickly, for they are under the control of the Government and the companies", - S&P assumes. The agency points on the risk of administrative freezing or tariffs decrease in case of economic falling and recommends the Government to increase transparency and predictability of regulation system. "Another important negative factor (which is also under the control of the President and the Government of the republic) should be considered as constant shift of assets and management in infrastructure companies, - says the report. - Substitution or rotary press of top management in all key state companies, likely, occurs at least once a year". "Frequent changes in management, and also corporate structure of enterprises are the significant factor of risk because they undermine the strategy's stability and predictability, companies' production and financial characteristics, - S&P warns. - At last, continuation of this practice may cause credit ratings decrease in infrastructure sector". In 2002 Kazakhstan authorities united state companies Kazakhoil, Kaztransoil and Kaztrabsgas into the holding Kazmunaigas, having partially changed their management and also structure and management of Kazakhstan temir zholy, the former leader of which is now accused of thefts. [2003-02-18]