Moody's changes outlook to positive on ten Kazakh GRIs following outlook change on sovereign
ALMATY. Aug 21 (Interfax) - International ratings agency Moody's Investors Service has changed to positive from stable the outlook on the Baa3 ratings of seven corporate government-related issuers (GRIs) operating in the oil and gas sector, namely: KazMunayGas NC JSC (KMG) and its subsidiaries Kazmunaigas Exploration & Production (KMG EP), KazMunaiGaz Finance Sub B.V., JSC KazTransOil (KTO), JSC KazTransGas (KTG), Intergas Central Asia (ICA), and Intergas Finance B.V., the agency said in a press release.
Moody's has also changed to positive from stable the outlook on the Baa3 rating of the country's railway transportation company JSC National Company Kazakhstan Temir Zholy (KTZ), Kazakhstan Temir Zholy Finance B.V., and on the Ba1 corporate family rating (CFR) and Ba1-PD probability of default rating (PDR) ratings of its fully owned subsidiary JSC Kaztemirtrans (KTT). Concurrently, Moody's affirmed these ratings.
According to the press release, the outlook on the Baa3 ratings of JSC Kazatomprom and Kazakhstan Electricity Grid Operating Company (KEGOC) remained unchanged at stable.
The rating actions follow Moody's revision of the outlook for Kazakhstan's sovereign ratings to positive from stable on August 16, 2013.
The action reflects Moody's view that the affected companies have strong linkages with the government and would benefit from the government's strengthening ability to provide support in the event of financial distress. Moody's notes that one of the factors positively affecting the government's rating, namely the favorable GDP growth outlook for Kazakhstan, driven by enhanced hydrocarbons production, is also likely to promote improvements in the affected companies' business profiles, the press release said.
The rating agency also believes that the government's financial strength, driven by, inter alia, an increase in the National Oil Fund's assets and a reduction of external debt, alleviates the risk of government's interference and potentially excessive demands on the GRIs' financial flexibility.
According to Moody's, the outlook on the Baa3 ratings of JSC Kazatomprom remains stable given the low correlation between the company's and the government's ratings.
The outlook on the Baa3 rating of Kazakhstan Electricity Grid Operating Company (KEGOC) remains stable primarily due to its relatively low baseline credit assessment (BCA).
Given the high support assumption embedded in the ratings of Kazmunaygas NC and its subsidiaries, as well as KTZ, the ratings and outlook of these issuers are likely to move in line with the sovereign rating, subject to other components of the ratings remaining unchanged (such as BCAs, support and dependence assumptions), Moody's said.
Moody's assumption of strong state support for KTT is based on the rating agency's expectation that the state support would be provided to KTT indirectly, i.e. by the company's parent, KTZ. Nevertheless, given that KTT is an integral part of KTZ, its ratings are likely to follow that of KTZ, provided there are no material changes in KTT's ownership structure and its role within the KTZ group, the press release said.
A reduction in Moody's assessment of government support for the companies, or a weakening of their BCAs, could trigger downward pressure on their ratings.