The Agency Fitch emphasizes that JSC Samruk-Energy's Long-Term Foreign- and Local-Currency credit ratings have been affirmed at 'BB', Outlook Stable, under Fitch's Government-Related Entities (GRE) Rating Criteria.
Ratings have been affirmed due to the fact that the Company made significant progress in deleveraging, achieving strong performance and significant financial results of the Group in 2018, which surpassed analysts' expectations.
The affirmed ratings include the Agency's opinion on innovations in the legislation on the recently approved electricity and capacity tariff model in Kazakhstan since 2019, as well as on the measures taken by the Group to adjust the marginal tariff and obtain individual tariffs in the future, including through the introduction of new capacities.
In conjunction with the increase in the Company's revenues, the Agency noted a significant reduction in the debt burden and, as a result, an improvement in the gross financial leverage indicator.
Moreover, it was noted an improvement in the quality of the loan portfolio in the form of committing a line from the Asian Development Bank, aimed at refinancing more expensive loans of the Company. At end-2018 the Company’s debt portfolio from international financial institutions accounted for around 30%, which has a significant impact on the score of the Group. At the same time, the Company expects to further increase the share of foreign multilateral lenders in the structure of the debt portfolio.
The Agency also indicated a significant reduction in the level of foreign currency risk from 60% at end-2016 to 20% of total debt at end-2018 which the Company expects to decrease further, as well as the activities carried out by the Group for hedging foreign currency risks.
Fitch views the status, ownership and control linkage of Samruk-Energy with the sovereign as strong, due to the company's full government ownership. Samruk-Energy accounted for around 30% of the country's electricity generation and around 40% of coal output in 2018.
The moderate socio-political implications of Samruk-Energy's potential default reflect the Agency’s view that most of the operations within its subsidiaries would likely continue following the impossibility of performance of obligations by the parent.
At the same time, the Agency notes that Samruk-Energy has a sufficient level of liquidity and cash to fully cover its short-term obligations.