November 13, 2018
The long-term credit rating of the issuer KazTransGas JSC and its key subsidiary Intergas Central Asia JSC (ICA) was raised by S&P Global Ratings to BB after a similar assessment in respect of the parent company. The forecast of change is “Stable”.
JSC NC KazMunayGas (KMG) is the direct owner of national operators of gas and oil pipelines of KazTransGas JSC (KMG) and KazTransOil JSC (KTO).
Despite the fact that these subsidiaries are exposed to the same risks to which the entire group is exposed, the improvement in the credit quality of the parent company has eased the possible pressure on ratings of the subsidiaries. As a result, the long-term corporate ratings of KTG and KTO have been upgraded from “BB-” to “BB” with a stable forecast.
At the same time, the subsidiaries cannot have the rating higher than the rating of the parent company, since there are not effective mechanisms that would alow to isolate KTO and KTG from the parent structure, which does not protect the subsidiaries from potential negative interference from KMG.
The international agency S&P Global Ratings believes that there is a “moderately high” probability that KTG will be provided with timely and rather extraordinary support in financial stress situation. According to the agency’s statement, such support is likely to be provided directly from the government but not from the parent company.
We remind that in October, 2018 KTG and PetroChina International Co.Ltd., signed joint agreement on purchase and sale of gas in volume of 10 billion cubic meters per annum over the next five years. Gas sale operations are profitable for KTG group; the price for the purchased gas at the moment is relatively low for KTG due to its status as a national operator, therefore, it is expected that the company will receive EBITDA profit margin of at least 20% from export gas sales.
Additional cash receipts from gas sales, according to Global Ratings, should not only maintain steady creditworthiness indicators at the level of KTG, but also have a positive impact on EBITDA rate of the consolidated KMG group.
Moreover, S&P Global Ratings considers that with the increase in volumes of KTG trading operations the importance of the company for KMG group has increased. Currently the rating agency considers KTG as a subsidiary of KMG, which has a “high strategic importance”, considering the integration of the company’s business into the group’s operating activities and close financial relationship with KMG.
KazTransGas JSC is the national operator of Kazakhstan in the field of gas and gas supply. The Group of companies KazTransGas JSC includes mining, transporting and selling gas and products of its processing enterprises and organizations.
Press Service of “KazTransGas” JSC
+7 7172 55 23 16