London, 27 February 2019 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Kazakhstan Electricity Grid Operating Company and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
Given its ownership by the government of Kazakhstan, which controls the company through JSC National Welfare Fund Samruk-Kazyna, Kazakhstan Electricity Grid Operating Company's (KEGOC, Baa3 stable) issuer rating is driven by a combination of (1) the company's Baseline Credit Assessment (BCA, a measure of standalone credit strength) of ba2; (2) the Government of Kazakhstan's rating (Baa3 stable); (3) the very high default dependence between the company and the government; and (4) the high probability of provision of state support to the company in the event of financial distress. The government is closely involved in KEGOC's strategic direction and guaranteed a large portion of the company's foreign-currency debt as of year-end 2018.
The rating takes into account (1) the company's monopoly position as the sole owner and operator of the country's national high-voltage electricity transmission grid, (2) its healthy financial profile on the back of sufficient tariff increases, and (3) cost and investment programme optimisation measures. KEGOC's BCA remains constrained by the company's high exposure to interest rate and foreign-currency risks, as well as sizeable investment programme, which includes both the modernisation of the aged asset base and government-initiated infrastructure projects.
This document summarizes Moody's view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
The principal methodologies used for this review were Regulated Electric and Gas Networks published in March 2017 and Government-Related Issuers published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.