MOSCOW (Standard & Poor's) Oct. 2, 2008--Standard & Poor's Ratings Services said today that it had affirmed its 'BB+' long-term corporate credit rating on Kazakh oil pipeline operator KazTransOil (KTO). The outlook is stable.
The rating on KTO reflects the high strategic importance of the company's operations to its parent company, JSC NC KazMunayGas (BBB-/Negative/--) and the Republic of Kazakhstan (BBB-/Negative/A-3). Using a top-down approach, we rate KTO one notch lower than KMG. We estimate KTO's stand-alone credit quality at 'BB+'.
"The stand-alone rating on KTO is supported by long-term ship-or-pay contracts with oil producers, the company's favorable debt structure, limited competition from alternative oil export pipelines, and good prospects for oil production and export in Kazakhstan," said Standard & Poor's credit analyst Sergei Gorin. "The company has not yet decided on whether to participate in the Eskene-Kuryk construction project, and a material debt-funded investment in this project could put pressure on KTO's stand-alone credit quality."
KTO also benefits from an advantageous tariff regime, illustrated by a recent 25% rise in export tariffs; low transportation costs; and a strong market position in Kazakhstan, based on the company's vast pipeline system. KTO distributes more than 60% of Kazakhstan's total oil exports.
On June 30, 2008, KTO reported liquidity reserves of $307 million in cash and cash deposits. These liquidity sources were significantly higher than the company's short-term debt of $24 million on the same date.
"The outlook is stable because we expect that KTO will maintain its stand-alone credit quality, which will counterbalance the macroeconomic risks in Kazakhstan and underpin the company's overall creditworthiness," said Mr. Gorin.