AKIPRESS.COM - Fitch Ratings has affirmed KazTransGas JSC's (KTG) and its fully-owned subsidiaries', Intergas Central Asia JSC's (ICA) and KazTransGas Aimak JSC's (KTGA), Long-term foreign currency Issuer Default Ratings (IDRs) at 'BBB-'.

The outlooks are Stable. KTG is the state-owned monopoly engaged in natural gas transit, transportation, distribution and sales in Kazakhstan (BBB+/Stable). The affirmation of KTG and its subsidiaries reflects Fitch's view that KTG's leverage and coverage ratios will return to acceptable levels in 2018, following a temporary weakening in 2016-2017 due to the reduction of PJSC Gazprom's (BBB-/Negative) transit of central Asian gas to Russia and the devaluation of the tenge in 2015. Fitch also expects JSC National Company KazMunayGas (NC KMG, BBB/Stable), KTG's parent, to continue supporting the group when needed.

KTG's ratings are notched down one level from NC KMG's ratings. KTG and ICA qualify as material subsidiaries in NC KMG's Eurobonds and are subject to cross-default provisions, but NC KMG does not guarantee their debt. Fitch believes that the 'national operator' status granted to KTG in 2012, the transfer of trunk gas pipelines from the state to ICA, as well as NC KMG's flexible approach to KTG's dividend payouts underline the strong parent-subsidiary links between KTG and NC KMG.

For example, in 2015, NC KMG provided a USD400m inter-company loan to KTG that used the funds to repay external borrowings, which Fitch views as a sign of parental support. This follows a 10-year KZT14.9bn loan granted in 2014. Additionally, NC KMG transferred its 50% stake in KazRosGas, an entity engaged in sales of gas from Karachaganak field, to KTG for trust management, which will increase KTG's cash flow by NC KMG's share in KazRosGas's dividends. NC KMG also participates in negotiations between Gazprom and KTG on the subsidiary's gas transit contract.

KTG's ratings reflect the company's status as the operator of the Kazakh gas pipeline network, the only transit route for central Asian gas to Russia and Europe, and its role in distribution and sales of natural gas in Kazakhstan domestically and for export. KTG has a pre-emptive right to purchase all produced natural gas from domestic oil & gas companies. ICA, the operator of trunk gas pipelines, generated nearly 79% of the group's consolidated EBITDA in 2015.

Fitch views the intra-group links between KTG, ICA and KTGA as strong and hence align the ratings of the two subsidiaries with KTG's 'BBB-'. The evidence of strong linkage includes KTG's financial guarantees to KTGA, operational interdependence and a common planning and budgeting process between the companies.