KazTransGas (KTG) revealed strong financial results for 2018 on the back of increasing gas sales to China, it is expected to maintain strong credit metrics going forward, Trend reports via Standard & Poor's.
KTG continues to enjoy a moderately high likelihood of extraordinary support from the state, if needed, and remains strategically important to its parent, KazMunayGas (KMG), said the company.
The stable outlook mirrors that on KMG, and reflects the view that KTG’s solid performance will continue, with funds from operations to debt remaining above 30 percent on a sustainable basis, and that the level of state support will remain unchanged.
"At the same time, the company’s stand-alone financial performance has improved thanks to increasing gas export volumes to China, a favorable difference between gas purchase and gas sales price, and completion of key capital expenditure (capex) projects," said the report.
"Although we believe future profits from export sales could be volatile, depending on price evolution, the funds from operation to debt are to stay above 30 percent," the company said.
In October 2018, KTG and PetroChina International Co. Ltd. signed a sales and purchase agreement for 10 billion cubic meters annually for the next five years. In 2018, KTG sold 5.5 bcm to China and 2.4 bcm to Russia, which was the main factor behind EBITDA growth.
KTG expects that additional cash flows from gas trading will support solid credit metrics at the KTG level, with FFO to debt remaining above 30 percent on a sustainable basis.
KTG has almost completed its large investments in order to increase the pipeline capacity of its export route to China, and it is forecasted that capex will decrease to 100 billion - 110 billion tenge in 2019 and 80 billion tenge in 2020 after peak capex of 116 billion tenge in 2018.
"We further anticipate the company will be in a position to fund its investment program with internally generated cash flows," said the report of the company.
The stable outlook mirrors that on KTG’s immediate parent KMG, and it is expected that the company’s investment program will decrease to a moderate level after peak spending in 2018, FFO to debt will comfortably exceed 30 percent, and that the group structure will not change significantly.
The report said the upside of KMG's performance limits ratings upside would depend on KTG’s performance rather than support from the parent or the state.
KTG is the 100 percent controlled gas subsidiary of Kazakhstan's national hydrocarbon company KMG, which in turn is 100 percent state owned. KTG operates 46.000 kilometers of gas distribution networks, 18.000 km of gas transmission pipelines, 56 compressor stations, and three underground gas storage facilities.
KTG’s liquidity is considered adequate, based on the assumption that liquidity sources will exceed uses by more than 2 times over the next 12 months.
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