S&P affirmed KTO’s credit rating at «BBB-» with a stable outlook.
S&P estimate of KTO's credit rating was based on estimate of the company's business risks profile at the acceptable level, and the financial risks profile - at the moderate level. S&P notes that KTO has solid market and competitive positions, plays the role of the main operator of the country oil pipeline network, has favorable debt structure and maturity profile, with no debt at KTO level, as well as adequate liquidity and a sizable amount of accumulated cash.
Rating of KTO reflects its financial flexibility, long-term contracts with oil producers, and stable regulated cash flows from oil transportation.
KTO gets benefits from its role as a strategic infrastructure services provider to its parent company – JSC NC «KazMunayGas» (hereinafter - KMG) and to the Kazakh government. According to S&P, KTO's status as «strategically important» entity within the KMG group and its importance to the government of Kazakhstan are underpinned by the company's role as the main operator of the country oil pipeline network. S&P believes that KTO would receive timely and sufficient government support if needed.
S&P anticipates that as long as KTO remains a «strategically important» entity of the KMG group, the rating on the company, which is currently capped by that on the parent, will move in line with the rating of KMG. Accordingly, only the improvement of stand-alone credit profile KMG to at least 'bb-' would lead to upgrade of KTO.
The stable outlook for KTO incorporates S&P expectations that the company will continue to benefit from its solid market and competitive positions, long-term contracts with oil producers, and stable regulated cash flows from oil transportation. The stable outlook also reflects the outlook on the parent company - KMG, which owns 90% of KTO's shares.
S&P considers that the financial risks' profile of KTO is moderate, since KTO has favorable debt structure - all of its outstanding debt is currently at the operating subsidiaries and joint ventures. S&P notes that KTO has a good financial flexibility, thanks to its adequate cash position, potential for deferral of most of new projects, as well as to the available borrowing capacity. S&P expects that KTO in the midterm will continue generating strongly positive operating cash flow due to the tariff adjustments in 2014. S&P estimates that sizable accumulated cash balances of KTO are sufficient to finance all existing investment projects and allow high dividend payouts.
