S&P RAISES KAZTRANSOIL RTGS TO 'BB+'; OUTLOOK STABLE

/REUTERS, London, August 2, 05/ - Standard & Poor's Ratings Services said today it raised its long-term issuer credit and senior unsecured debt ratings on Kazakhstan-based oil transport company KazTransOil (KTO) to BB+' from 'BB'. The outlook is stable. "The upgrade reflects the growing strategic importance of KTO to the Kazakh government and the stronger implicit and explicit governmental support to KTO and its parent, the 100% government-owned KazMunaiGas oil-and-gas group," said Standard & Poor's credit analyst Eugene Korovin. "The upgrade also recognizes the gradual improvement of KTO's market position and positive regulatory changes." The ratings on KTO continue to remain constrained, however, by the company's lack of transparent regulation, the relatively poor state of the company's assets by international standards, and the operational demands of expanding the pipeline network to allow exports to China. These weaknesses are offset by KTO's monopoly operations, with limited competition from rail and other pipelines; the company's strategic importance to Kazakhstan's growing oil industry; and the increasing support of the Kazakh government. The stable outlook reflects Standard & Poor's expectations that KTO will continue to expand its operations on the back of continued oil production growth in Kazakhstan, and successfully manage its exposure to volume risk on new export pipelines. Recent favorable changes in tariff regulation will improve KTO's prospects of full cost recovery for new pipeline projects, offsetting the increased financial risk in the medium term and mitigating new pipeline-project-related risks. [2005-08-02]