Fitch Ratings has affirmed KTO’s long-term foreign currency Issuer Default Rating (hereinafter - IDR) at «BBB» with a Stable Outlook. Fitch has simultaneously upgraded KTO’s Long-term local currency IDR to 'BBB+' from 'BBB' with a Stable outlook. KTO’s National Long-term rating and National senior unsecured rating have also been upgraded to «AAA(kaz)» from «AA+(kaz)» to reflect the upgrade of KTO’s Long-term local currency IDR.
KTO’s ratings reflect its strong operations and credit profile, which Fitch expect will maintain at least over the medium term, and its strategic importance to the economy of Kazakhstan.
Fitch mention that KTO’s ratings are capped by those of JSC NC «KazMunayGas» (hereinafter - NC KMG, BBB/Stable), KTO’s majority shareholder. Fitch cap KTO’s ratings at NC KMG’s level because the parent exercises significant influence over KTO’s free cash flow through dividends, which NC KMG needs to service its large standalone debt of KZT3.2trn (USD17.3bn) at end-March 2015. KTO’s dividend payout ratio for 2014 was 100% and has been relatively high historically, ranging from 66% to 231% in 2011-2014.
Fitch considers that KTO’s uncapped ratings are in the low ‘A’ category.
Fitch point out that KTO dominates the Kazakh oil transportation sector and as a national operator holds a monopolistic position in domestic oil transportation. KTO estimates that in 2014 it shipped 53% of crude produced in Kazakhstan, excluding the volumes shipped by its two JVs with China National Petroleum Corporation, which operate the major parts of the 20m tons per annum capacity Kazakhstan-China oil pipeline.
Fitch also believe that in the event of financial stress, the state would support KTO, either directly through equity contributions or loans from state owned banks and funds, or indirectly through higher transport tariffs.
