Page 20 - FSUOGM Week 31

FSUOGM NEWS IN BRIEF FSUOGM

Azerbaijan, like every other country, has (ICA) and KazTransGas Aimak (KTGA) at and improving gas export margins.”
seen a massive reduction in income and, by 'BBB-' with a stable outlook. Tangible progress in the recently
extension, tax paid by companies. Tourism, KTG's rating is at the same level as that announced divestment of KTG from NC
which until recently had played a growing of its immediate parent, state-owned oil KMG and its transfer in state ownership
role in the country’s income, has now all but and gas firm KazMunayGas. The linkage through Sovereign Wealth Fund Samruk-
evaporated, with cross-border traffic and between KTG and KMG is accessed as Kazyna JSC (BBB/Stable) will likely result
flights significantly reduced. Meanwhile, oil “strong” under Fitch’s Parent and Subsidiary in changing the rating approach using
incomes are also down due to the shrinking Rating Linkage Criteria. The affirmation the ratings agency’s Government-Related
demand for the black stuff. of ICA and KTGA's ratings reflects Fitch’s Entities (GRE) Rating Criteria, Fitch noted.
"The spread of the coronavirus pandemic assessment that the linkage between KTG “We do not expect a significant impact
has led to an increase in negative trends and its wholly owned subsidiaries is strong on KTG's creditworthiness from its JVs
in the global economy," Sharifov said enough to warrant the alignment of their Beineu-Shymkent Gas Pipeline LLP (BSGP,
during a meeting on amendments to the ratings. BBB-/Stable) or Asian Gas Pipeline LLP
Law on State Budget of the Republic of “The oil prices drop in 2020 could debt repayment, which is guaranteed by
Azerbaijan at the Parliamentary Committee impact prices under the Chinese gas CNPC and NC KMG,” the statement said.
on Economic Policy, Industry and contract, where the gas price is linked to “KTG has also started to provide guarantees
Entrepreneurship. oil products with a nine-month lag. This for BSGP's USD360 million bank loan,
He said that the International Monetary would result in KTG's leverage peaking in which equals to the same USD360 million
Fund (IMF) has updated its forecasts in a 2020-2021, although this could be partially guaranteed by NC KMG. We do not include
number of areas: "Including forecasts on the offset by more profitable operations from these guarantees in our rating case, as we
prices of oil and oil products of interest to gas transportation business,” Fitch said. “We expect BSGP to generate sufficient cash
us." expect FFO gross leverage will be above flows to service its obligations. BSGP's 2019
Sharifov added: “The processes our negative sensitivity for the SCP of 3.0x EBITDA increased to KZT150 billion (with
taking place in the world, the rise of the during 2020-2021 with gradual recovery 87% EBITDA margin) from KZT29 billion
coronavirus to the level of a pandemic, to below 3.0x from 2022 assuming low in 2016 due to significant gas delivery
the negative impact on the entire global capex and no dividends during the rating volumes to China.”
economy have led to the deterioration of the horizon.” KTG's 'BBB-' IDR is supported by its
balance of payments of our country.” “We view the export operations as more monopoly in domestic gas transmission and
volatile than the gas transportation business distribution in Kazakhstan, its dominant
due to the exposure to price changes,” it position in export gas transportation and
Fitch affirms local and added. “We conservatively assume the sales as well as increasing export volumes to
export volume to China to average 8bcm
China, the statement said. KTG's business
foreign currency IDRs for annually in 2020-2021 (7.1 bcm in 2019, profile is comparable to state-owned oil
pipeline operator KazTransOil, though KTO
5bcm in 2018) with an average export
KazTransGas at 'BBB-' with selling price of USD150-USD170/mcm lags KTG in size and share of the Kazakh oil
(down from USD215/mcm in 2019). KTG's
transportation market.
stable outlook gas export contract to China assumes
10bcm annual export volumes from 2019.
Fitch Ratings last week affirmed the long-term KTG also supplies around 1bcm of gas to
foreign and local currency issuer default ratings Russia and neighbouring central Asian
(IDRs) of KazTransGas JSC (KTG) and its countries. We expect gradual deleveraging
fully owned subsidiaries, Intergas Central Asia from 2022 once oil prices start recovering

P20 www. NEWSBASE .com Week 31 05•August•2020