On March 29, 2018 the international rating agency Fitch Ratings (hereinafter – Fitch) affirmed JSC KazTransOil's (hereinafter – KTO) Long-Term Foreign-Currency Issuer Default Rating at «BBB-» with a Stable Outlook.
Fitch notes that the ratings reflect KTO's strong operational and very strong financial profile, which Fitch expects it to maintain at least over the medium term, as well as its strategic importance to the economy of Kazakhstan. KTO's ratings are capped by those of its parent JSC NC KazMunayGas («BBB»-/Stable). KTO has strong operational and strategic ties with JSC NC KazMunayGas, which exercises significant influence over KTO's free cash flow through dividends.
Fitch expects KTO's domestic transportation volumes to somewhat increase following the completion of the upgrade of refineries. According to Fitch, export volumes may fall marginally due to depletion at some fields in the central part of Kazakhstan and redistribution of crude oil volumes from Kashagan through alternative routes. However, Fitch concludes that this trend will not weaken the company's business profile as lower exports should be offset by higher transit volumes. PJSC Rosneft Oil Company has increased its volumes through Kazakhstan to China from 7 million tons in 2017 to 10 million tons in 2018. In addition, KTO's transit volumes to Uzbekistan should reach 5 million tons in 2022 after a new refinery in Uzbekistan has come on stream.
In 2015 Kazakhstan's Committee for Regulation of Natural Monopolies and Protection of Competition approved five-year domestic tariff growth of 10% pa. KTO’s export tariffs will be increased by 10% starting from 1 April 2018. Fitch analysts also highlight KTO's ability to raise export and transit tariffs is beneficial for the KTO’s credit profile.
Fitch views KTO's stand-alone operational profile as commensurate with the 'BBB' rating category, limited by the regulatory environment and asset concentration in a single country.
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