On September 9, 2016 Fitch Ratings affirmed Kazakhstan-based JSC KazTransOil’s (hereinafter – KTO) Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BBB-’ with a Stable Outlook.
The ratings reflect KTO's strong operational and financial profile, which the company to maintain at least over the medium term, as well as its strategic importance to the economy of Kazakhstan.
Its ratings are capped by those of its parent, JSC National Company KazMunayGas (hereinafter – KMG, ‘BBB’-/Stable). Fitch caps KTO’s ratings at the KMG’s level because the parent exercises significant influence over KTO’s free cash flow through dividends, which KMG uses to service its large standalone unadjusted debt of KZT 3,1trn (USD 9,3bn) at end-June 2016. KTO’s dividend payout ratio for 2015 was 114% and ranged from 66% to 231% in 2011-2015.
KTO’s domestic transportation tariffs are regulated by Kazakhstan’s Committee for Regulation of Natural Monopolies (CRNM). In 2015, CRNM approved five-year domestic tariff growth of 10% p.a. Subsequently, KTO raised its domestic tariff by10% on 1 October 2015 and by another 10% at the beginning of 2016. Further 10% annual increases are expected in 2017-2019, improving the visibility of KTO’s future revenue.
KTO has no financial debt.
Fitch views KTO’s operational profile as commeasure with the ‘BBB’ rating category, limited by the regulatory environment and asset concentration in a single country. Fitch expects, 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 transportation tariffs.
KTO holds monopolistic position in domestic oil transportation.
Public Affairs and Internal Communications Service
