S&P affirms Kazakh KazMunaiGas 'BBB-/kzAA' ratings
Standard & Poor's Ratings Services affirmed its 'BBB-' long-term
corporate credit rating on Kazakhstan's National Oil And Gas
Company KazMunaiGas (KMG), the rating agency reported on April 22.
The outlook is stable.
At the same time, the agency affirmed the 'kzAA' Kazakhstan
national scale rating on the company.
"The affirmation reflects our unchanged assessments of KMG's
stand-alone credit profile (SACP) at 'b+' and the likelihood of
extraordinary government support as "extremely high." KMG's
financial risk profile has been improving, and we now assess it as
"aggressive," from "highly leveraged" previously," S&P
said.
Still, the agency thinks that KMG's future financial performance is
subject to uncertainties, such as the commissioning of the Kashagan
field and the return on KMG's investments in refinery
modernization. These uncertainties cannot be reliably captured in
base case. Therefore, S&P now assigns a "negative" financial
policy modifier of minus one notch. The agency believes that at
'b+', KMG's SACP assessment compares well with those of other
entities and, therefore, the comparable ratings analysis is
"neutral."
The stable outlook reflects the expectation that KMG will continue
to benefit from an "extremely high" likelihood of extraordinary
government support. It also reflects the stable outlook on the
sovereign.
Rating upside could stem from KMG's SACP improving to 'bb-'. This
could happen if KMG benefits from successful implementation of its
large investments (notably if Kashagan starts generating cash),
avoids large debt-financed acquisitions, and keeps at least
"adequate" liquidity. An upgrade could also follow from materially
improving credit metrics (with FFO to adjusted debt consistently
above 30 percent), improving free cash flow generation, and KMG
managing to lower its debt via equity contributions from the
government or reducing its large cash balances. In addition, the
agency could upgrade KMG if it upgrades the sovereign, if its view
on the likelihood of extraordinary support remains unchanged.
S&P might consider a negative rating action if KMG's SACP
deteriorated to 'ccc+', as a result, for example, of heavy
liquidity pressure, although the agency views this as very
unlikely. Also, S&P could lower the rating on KMG if it lowered
the sovereign local currency rating, or if it saw that the
government's stance toward KMG was no longer consistent with an
"extremely high" likelihood of support. This could happen if the
government reduces its stake in KMG via an IPO and if it loosens
KMG's links with the government, which is not the base-case
scenario at the moment.