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Kazakhstan State-Owned Vertically Integrated Electricity Utility Samruk-Energy Rated 'BB+/B' And 'kzAA-'; Outlook Stable

November 21, 2012 Standard & Poor's
Primary Credit Analyst: Sergei Gorin, Moscow, (7) 495-783-4132; sergei_gorin@standardandpoors.com
Secondary Contact: Elena Anankina, CFA, Moscow, (7) 495-783-4130; elena_anankina@standardandpoors.com
Additional Contact: Infrastructure Finance Ratings Europe; InfrastructureEurope@standardandpoors.com

• We think Kazakhstan-based Samruk-Energy JSC enjoys a "high" likelihood of extraordinary government support in the event of financial distress.
• In our view, Samruk-Energy has a "fair" business risk profile and an "aggressive" financial risk profile.
• We are assigning our 'BB+' long-term corporate credit rating, 'B' short-term corporate credit rating, and 'kzAA-' national scale rating to Samruk-Energy.
• The outlook is stable, reflecting that on its 100% owner, Kazakhstan, as well as our view of the "high" likelihood of extraordinary government support in the event of financial distress.

MOSCOW (Standard & Poor's) Nov. 20, 2012--Standard & Poor's Ratings Services said today that it had assigned its 'BB+' long-term corporate credit rating, 'B' short-term corporate credit rating, and 'kzAA-' national scale rating to Kazakhstan state-owned vertically integrated electricity utility Samruk-Energy JSC. The outlook is stable.

The ratings on Samruk-Energy, which is fully owned by the government of Kazakhstan (BBB+/Stable/A-2; Kazakhstan national scale 'kzAAA') through its investment vehicle Samruk-Kazyna (BBB+/Stable/A-2; Kazakhstan national scale 'kzAAA'), reflect our assessment that there is a "high" likelihood of extraordinary government support in the event of financial distress (in accordance with our criteria for government-related entities). They also reflect the company's stand-alone credit profile (SACP) of 'b+', which is based on our view of its "fair" business risk profile and "aggressive" financial risk profile.

Our assessment that there is a "high" likelihood of state support is based on our view of Samruk-Energy's "important" role for and "very strong" link with the government.

The stable outlook reflects that on the sovereign rating as well as our expectation that Samruk-Energy continues to enjoy a "high" likelihood of extraordinary government support in the event of financial distress.

Upside potential for the long-term corporate credit rating might arise from stronger-than-expected operational and financial performance, a reduction in investment plans without jeopardizing long-term operational stability, or significant equity injections from the government, which would decrease the need for the new borrowing. All else being equal, we believe an adjusted debt-to-EBITDA ratio of below 3.0x could lead to an upward revision of the SACP and, consequently, to a higher corporate credit rating.
A one-notch downward revision of the company's SACP, however, would not result in a downgrade, provided that the likelihood of extraordinary government support remains unchanged. Nevertheless, we could lower the long-term corporate credit rating if the company's liquidity profile were to significantly deteriorate, or if debt leverage increased by more than we currently expect. We see a Standard & Poor's-adjusted debt-to-EBITDA ratio exceeding 4.0x, without tangible plans to be decreased in the short term, as potentially leading to a lower SACP.

If we revised our assessment of the likelihood of timely and sufficient state support, it would result in a change to the ratings under our criteria, provided the SACP remains at 'b+'. This could be triggered by any unexpected privatization of a significant share of the company or by any unanticipated weakening of support for another Kazakhstan government-owned entity.
Company — Samruk-Energy
  • Full name
    Samruk-Energy JCS
  • Registration country
    Kazakhstan
  • Industry
    Power