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Rating Action:

Moody's upgrades ratings of five Kazakhstani GRIs to Baa2; outlook stable

12 Aug 2021

Follows Kazakhstan's sovereign rating upgrade to Baa2 with a stable outlook

London, 12 August 2021 -- Moody's Investors Service ("Moody's") has today upgraded to Baa2 from Baa3 the ratings of five Kazakhstani government-related issuers (GRIs) -- in the oil and gas, utilities and mining sectors. Kazakhstan Electricity Grid Operating Company's (KEGOC) and Kazatomprom JSC's (KAP) baseline credit assessments (BCAs) have been upgraded all by one notch. KazMunayGas NC JSC's (KMG), JSC KazTransGas's (KTG) and Intergas Central Asia's (ICA) BCAs have been affirmed. KMG's, KTG's, ICA's and KEGOC's outlooks have been changed to stable from positive. KAP's outlook remains stable.

For all affected GRIs, their support and dependence assumptions remain unchanged as a result of this rating action.

Today's rating actions follow a sovereign rating action on the government of Kazakhstan which took place on 11 August 2021, where Moody's upgraded the government of Kazakhstan's long-term issuer and senior unsecured debt ratings to Baa2 from Baa3 and changed the outlook to stable from positive. For additional information, please refer to the related announcement https://www.moodys.com/research/--PR_450654.

A complete list of affected companies and rating actions can be found at the end of this press release.

RATINGS RATIONALE

Today's rating actions are in line with the sovereign rating action and reflect the strong credit linkages of the affected companies with the state, their strategic importance for the country, as well as their exposure to Kazakhstan's operating and macroeconomic environment.

The upgrade of Kazakhstan's sovereign rating was driven by Moody's assessment that Kazakhstan's sovereign balance sheet and credit profile demonstrates resilience that is consistent with peers at the Baa2 rating level. This resilience is underpinned by the size and effective use of the country's sovereign wealth assets, which Moody's expects will grow and continue to exceed the level of government debt for the foreseeable future, as well as the lengthening and ongoing track record of credible enhancements to the macroeconomic policy framework that promotes external stability.

The stable outlook on Kazakhstan's sovereign rating reflects balanced risks. On the upside, ongoing institutional and economic reforms may strengthen Kazakhstan's governance framework and raise the country's attractiveness as an investment destination with the potential to accelerate the process of economic diversification, although Moody's expects tangible benefits to take time to materialise. On the downside, any renewed weakness in oil prices, protracted cuts to oil production and/or significant slowdown in the domestic economic recovery due to still high coronavirus infections in the country may weigh on government finances and Kazakhstan's credit metrics. If persistent, this has the potential to materially reduce the government's fiscal buffers.

KEGOC's BCA has been upgraded to ba1 from ba2, primarily reflecting its sustainably strong operating performance and robust credit metrics, and good liquidity.

KAP's BCA has been upgraded to ba1 from ba2, primarily reflecting its strong business profile and a track record of financial performance, underpinned by high margins, low leverage and strong liquidity, despite shareholder friendly dividend policy and continuing rationing of production to support uranium prices.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook on the affected companies' ratings is in line with the stable outlook on Kazakhstan's sovereign rating and reflects our view that the companies' specific credit factors, including their operating and financial performance, credit metrics, market position and liquidity, will remain commensurate with their ratings on a sustainable basis, and there will be no weakening in the probability of extraordinary state support in the event of financial distress.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

KazMunayGas NC JSC

Moody's could upgrade KMG's rating if it were to upgrade Kazakhstan's sovereign rating and KMG's BCA, provided there are no adverse changes in the probability of extraordinary state support in the event of financial distress. Moody's could upgrade the company's BCA if it significantly improves its credit metrics on a sustainable basis and maintains its strong business profile, operating performance, market position and liquidity.

Moody's could downgrade KMG's rating if it were to downgrade Kazakhstan's sovereign rating, or if it reassesses the probability of government support in the event of financial distress to a weaker level. Moody's could also downgrade the rating if the company's Moody's-adjusted retained cash flow (RCF)/net debt were to decline below 15% on a sustained basis, or KMG group's business and risk profile weakens as a result of regulatory changes or corporate reorganizations leading to weaker or more volatile cash flow generation, credit metrics and liquidity.

JSC KazTransGas

Moody's could upgrade KTG's rating if it were to upgrade Kazakhstan's sovereign rating, KMG's rating and KTG's BCA, provided there are no adverse changes in the probability of extraordinary state support in the event of financial distress.

Moody's could downgrade KTG's rating if it were to downgrade Kazakhstan's sovereign rating or KMG's rating, or if the company's (funds from operations + interest expense)/interest expense declines below 4.0x, funds from operations/debt declines below 15% and retained cash flow/debt declines below 12%, all on a sustained basis, and liquidity deteriorates materially. Moody's could also downgrade the rating if it reassesses the probability of government support in the event of financial distress to a weaker level, or the company's business and risk profile weaken as a result of regulatory changes or corporate reorganizations leading to weaker or more volatile cash flow generation, credit metrics and liquidity.

Intergas Central Asia

Moody's could upgrade ICA's rating if it were to upgrade Kazakhstan's sovereign rating and KTG's rating, provided there is no material deterioration in the company's operating and financial performance, market position and liquidity, and no adverse changes in the probability of extraordinary state support in the event of financial distress.

Moody's could downgrade ICA's rating if it were to downgrade Kazakhstan's sovereign rating or KTG's rating, or if the company's operating and financial performance, market position and liquidity were to deteriorate materially. Moody's could also downgrade the rating if it reassesses the probability of government support in the event of financial distress to a weaker level.

Kazakhstan Electricity Grid Operating Company

Moody's could upgrade KEGOC's rating if it were to upgrade Kazakhstan's sovereign rating, provided that the company's standalone profile assessment and liquidity remain solid.

Moody's could downgrade KEGOC's rating if it were to downgrade Kazakhstan's sovereign rating, or if the company's financial profile, credit metrics and liquidity deteriorated significantly.

Kazatomprom JSC

Moody's could upgrade KAP's rating if it were to upgrade Kazakhstan's sovereign rating, provided there is no material deterioration in the company's operating and financial performance, market position and liquidity, and no adverse changes in the probability of extraordinary state support in the event of financial distress.

Moody's could downgrade KAP's rating if it were to downgrade Kazakhstan's sovereign rating, or if the company's operating and financial performance, market position and liquidity were to deteriorate materially. A reassessment of the probability of government support in the event of financial distress to a weaker level would also exert negative pressure on the rating.

LIST OF AFFECTED RATINGS

..Issuer: KazMunayGas NC JSC

Upgrades:

....LT Issuer Rating, Upgraded to Baa2 from Baa3

....Senior Unsecured Medium-Term Note Program, Upgraded to (P)Baa2 from (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Upgraded to Baa2 from Baa3

Outlook Action:

....Outlook, Changed To Stable From Positive

..Issuer: KazMunaiGaz Finance Sub B.V.

Upgrade:

....BACKED Senior Unsecured Medium-Term Note Program, Upgraded to (P)Baa2 from (P)Baa3

Outlook Action:

....Outlook, Changed To Stable From Positive

..Issuer: Kazatomprom JSC

Upgrade:

....LT Issuer Rating, Upgraded to Baa2 from Baa3

Outlook Action:

....Outlook, Remains Stable

..Issuer: Intergas Central Asia

Upgrade:

....LT Issuer Rating, Upgraded to Baa2 from Baa3

Outlook Action:

....Outlook, Changed To Stable From Positive

..Issuer: JSC KazTransGas

Upgrades:

....LT Issuer Rating, Upgraded to Baa2 from Baa3

....BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Baa2 from Baa3

Outlook Action:

....Outlook, Changed To Stable From Positive

..Issuer: Kazakhstan Electricity Grid Operating Company

Upgrade:

....LT Issuer Ratings, Upgraded to Baa2 from Baa3

Outlook Action:

....Outlook, Changed To Stable From Positive

PRINCIPAL METHODOLOGY

The principal methodologies used in rating Kazakhstan Electricity Grid Operating Company were Regulated Electric and Gas Networks published in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059225, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. The principal methodologies used in rating Kazatomprom JSC were Mining published in September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1089739, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. The principal methodologies used in rating Intergas Central Asia and JSC KazTransGas were Natural Gas Pipelines published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113727, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. The principal methodologies used in rating KazMunayGas NC JSC and KazMunaiGaz Finance Sub B.V. were Integrated Oil and Gas Methodology published in September 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1172345, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Artem Frolov
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
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JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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