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S&P revises outlook on Kazakh Electricity Grid Operating Co.

24 November 2017 [15:06] - TODAY.AZ

By  Trend

S&P Global Ratings has revised its outlook on Kazakhstan Electricity Grid Operating Co. (JSC) to positive from stable, affirming the 'BB' long-term corporate credit rating.

“At the same time, we affirmed our 'BB' issue rating on KEGOC's senior unsecured bank loan from the European Bank For Reconstruction And Development (EBRD),” S&P reported.

The outlook revision reflects organization’s view that KEGOC's credit ratios could strengthen in the next 12 months, owing to the favorable tariffs set for 2016-2020 and efficient cost management.

“We expect the company will continue generating stable operating cash flows that suffice for gradual debt repayment. We forecast funds from operations (FFO) to debt will increase to more than 30 percent in 2017 and to 33-35 percent in 2018, from about 26 percent in 2016.”

S&P also stressed that the appetite for dividends of KEGOC's parent, 100 percent state-owned national welfare fund Samruk-Kazyna, is likely to increase to up to 100 percent of net income, in line with the existing dividend policy, compared with moderate 40 percent payouts on average in the past.

This, together with still-significant capital expenditure (capex) needs, will lead to negative discretionary cash flow in the next few years, according to S&P.

“The positive outlook on KEGOC reflects the increased likelihood that KEGOC can sustainably exceed our upgrade thresholds through solid performance and continued debt reduction. We think the current favorable tariffs can support KEGOC's cash flow generation and enable the company to gradually reduce its debt.”


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