Кредитные рейтинги

Кредитные рейтинги

Fitch Upgrades Kazakhstan Utility Systems to 'BB-'; Outlook Stable

Fitch Ratings - Dubai - 10 Oct 2023: Fitch Ratings has upgraded Kazakhstan-based utility Limited Liability Partnership Kazakhstan Utility Systems' (KUS) Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB-' from 'B+'. The Outlook is Stable.

The upgrade mainly reects improved liquidity with better spread of debt maturities following the amended loan agreement with the largest creditor, reduced frequency and size of related-party transactions, and our expectations that KUS's nancial prole will remain strong, with FFO leverage around 2x on average over 2023-2026.

The rating continues to incorporate weak corporate governance, the evolving regulatory framework in Kazakhstan, FX risk and overall limited nancial exibility.


Improving Financial Flexibility: In September 2023, KUS signed an amendment agreement on its loan in Russian roubles, which accounted for around 60% of Fitchcalculated debt at end-2022. It entails extension of maturity from 2025 to 2027, lower amortisation payments in 2023-2025 and cancellation of some covenants (not related to leverage) that KUS was breaching in previous years.

This has improved KUS's liquidity, with the company's sources of funding now broadly matching upcoming maturities in 2H23-2024, compared with liquidity shortfall in previous years. In addition, the Russian rouble depreciated 25% against the tenge from January 2023, which is positive for KUS's leverage and liquidity prole.

Reduced Related-Party Transactions: The frequency and amount of KUS's relatedparty transactions have materially decreased since 2018. Some of them were resolved, including the release of asset pledge against YDD's debt of KZT24 billion in 2022 and the repayment of a KZT3 billion interest-free loan by a third party in 2021. Fitch continues to view KUS's corporate governance as weak, reecting a non-transparent

10/10/23, 5:23 PM Fitch Upgrades Kazakhstan Utility Systems to 'BB-'; Outlook Stable

https://www.fitchratings.com/research/corporate-finance/fitch-upgrades-kazakhstan-utility-systems-to-bb-outlook-stable-10-10-2023 2/11

ownership structure and large related-party transactions with limited disclosure when economic benet to KUS is uncertain.

Low Leverage, Reasonable Coverage: Fitch forecasts FFO leverage to be around 2x in 2023-2026 (2.2x in 2022). This is backed by cash ow from operations averaging KZT36 billion a year, driven by tariff growth in the generation and distribution segments, and capex of KZT34 billion a year on average over 2023-2026. We conservatively continue treating nancial interest-free aid received from afliated companies (KZT11.7 billion at end-2022 and KZT6 billion at end-2021) as debt, although we expect it to be rolled over. We project FFO interest coverage to remain above 4x in 2023-2026.

Emerging Regulation: In Kazakhstan tariffs for generation, distribution and supply segment are regulated. The regulatory framework generally allows for recovery of the companies' costs and investments. However, tariffs are subject to frequent revisions and are vulnerable to regulatory interference for social reasons. This results in lower stability of KUS' cash ows compared with markets with more established regulation.

Healthy Growth in Generation Tariffs: Electricity generation tariffs are approved until 2025. From July 2023 electricity generation tariffs were increased by around 30% for KUS generation companies Karaganda Energotsentr and Ust-Kamenogorskaya TPP. These will remain at thereafter until 2025, although always with possible revisions. Over 2020-2022 average tariff growth was around 10% annually, close to ination over that period.

Long-Term Distribution Tariffs: Electricity distribution tariffs for KUS's networks are approved until 2025-2027. Mangistau Regional Electricity Network Company's (MRENC, key subsidiary for KUS) distribution tariffs were approved with an average 6% increase a year over 2023-2025. Tariffs for Karaganda Zharyk and Ontustik Zharyk Transit were approved with an average tariff increase of 11% and 4% a year, respectively. The approval of long-term tariffs improves visibility of cash ows in the distribution segment.

Earnings Upside from the Capacity Market: Around 75% of KUS's installed capacity receives payments from the capacity market, which represents 16% of EBITDA in 2022. These payments cover the company's xed costs and do not have volume risk. The tariff for capacity has been at since the launch of the new market in 2019. Capacity tariff indexation would present an upside to our rating case.

Vertical Integration; Small Scale: KUS's business prole benets from vertical integration and a strong position in electricity generation, distribution and supply in highly populated central Kazakhstan (Karaganda Region), the south and eastern regions,

10/10/23, 5:23 PM Fitch Upgrades Kazakhstan Utility Systems to 'BB-'; Outlook Stable

https://www.fitchratings.com/research/corporate-finance/fitch-upgrades-kazakhstan-utility-systems-to-bb-outlook-stable-10-10-2023 3/11

and from a near-monopoly position in electricity transmission and distribution in the Region of Mangistau, one of Kazakhstan's strategic oil- and gas-producing regions. Together, these areas host 35% of the country's population.

The business prole is constrained by KUS's small scale of operations, with around 6% of the country's electricity generation, and high exposure to coal-red generation.


KUS's closest peers are Kazakhstan-based utility holding JSC Samruk-Energy (BB+/Stable, standalone credit prole, SCP: bb-) and transmission operator Kazakhstan Electricity Grid Operating Company (KEGOC) (BBB-/Stable, SCP: bb+). The peers have stronger market positions than KUS due to larger operations and a wider geographical presence within Kazakhstan.

Samruk-Energy and KEGOC have stronger liquidity proles than KUS due to better access to credit lines and longer maturity proles. KUS's nancial prole has become comparable to that of Samruk-Energy following the deleveraging in recent years, but remains slightly weaker than that of KEGOC.

KUS is rated on a standalone basis. Samruk-Energy is rated two notches below the sovereign under our "Government-Related Entities Criteria". KEGOC is rated one notch below the sovereign under these criteria.


Fitch's Key Assumptions Within Our Rating Case for the Issuer:

  • GDP growth of 4%-5% and CPI of 8%-15% over 2023-2027
  • Electricity generation and distribution volumes to grow at low single-digit percentages in 2023-2027; at heat generation volumes over the same period
  • Electricity generation tariffs to increase by around 30% from July 2023 as approved by the regulator, with below-ination growth in 2024-2027
  • Electricity distribution tariff growth as approved by the regulator until 2025-2027
  • Cost ination slightly below expected CPI
  • Capex averaging KZT34 billion a year over 2023-2027, slightly above KUS's management guidance

10/10/23, 5:23 PM Fitch Upgrades Kazakhstan Utility Systems to 'BB-'; Outlook Stable

https://www.fitchratings.com/research/corporate-finance/fitch-upgrades-kazakhstan-utility-systems-to-bb-outlook-stable-10-10-2023 4/11

  • No repayment of loans provided to third parties
  • Cost of new debt going down from an average of 17% in 2023-2024 to 12%-13% thereafter as ination in Kazakhstan moderates


Factors that could, individually or collectively, lead to positive rating action/upgrade:

  • Increased transparency of the ownership structure and generally stronger corporate governance
  • Increased scale of business
  • Long-term predictability of the regulatory framework, with less political interference in a stronger operating environment

Factors that could, individually or collectively, lead to negative rating action/downgrade:

  • Deterioration of corporate governance (e.g. a signicant increase in loans and guarantees to entities outside the company), adverse tariff changes or aggressive M&A resulting in FFO leverage persistently higher than 3x and FFO interest coverage below 3.7x
  • Worsening liquidity position, and increased reliance on renancing in local banks to meet maturities coming due


Liquidity Improved, but Still Tight: The company's liquidity prole has improved following the amendment loan agreement with its largest creditor. At end-June 2023, KUS had KZT2.6 billion of cash and cash equivalents and available uncommitted credit lines of KZT5 billion with an availability period over one year. This, combined with expected positive FCF of around KZT9 billion, roughly matches expected maturities of around KZT16.6 billion in 2H23-2024. We expect nancial aid from related parties (KZT14.6 billion at end-June 2023) to continue being extended or renanced annually.

Debt mostly comprises secured loans from local banks, which are raised at both holdco and opco level and bonds at MRENC level. At end-1H23 the largest creditors were JSC Sberbank Russia (KZT49 billion) and the European Bank for Reconstruction and Development (KZT11 billion). Around 60% of Fitch-calculated debt at end-June 2023 was denominated in Russian roubles and 2% in US dollars, with the rest in tenge.

10/10/23, 5:23 PM Fitch Upgrades Kazakhstan Utility Systems to 'BB-'; Outlook Stable

https://www.fitchratings.com/research/corporate-finance/fitch-upgrades-kazakhstan-utility-systems-to-bb-outlook-stable-10-10-2023 5/11


KUS is an integrated utility, with operations in electricity generation, distribution and supply across four regions in Kazakhstan, which in total account for 35% of the country's population.


We reclassied interest-free short-term loans from related parties to debt from other accounts payable.

We reclassied cash with restricted use to restricted cash from other current assets.


The principal sources of information used in the analysis are described in the Applicable Criteria.


Limited Liability Partnership Kazakhstan Utility Systems has an ESG Relevance Score of '4' for Governance Structure and '4' for Group Structure due to non-transparent ownership structure and large related-party and third-party transactions. These factors have a negative impact on the credit prole and are relevant to the rating, in conjunction with other rating factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.tchratings.com/topics/esg/products#esg-relevance-scores.