Moody's lifts KazTransOil to Baa1

Moody's Investors Service said it upgraded the ratings for JSC KazTransOil to Baa1 from Baa2.

The outlook is stable.

The agency said the upgrade is driven by the improved fundamentals for oil transmission business in Kazakhstan reflected in an improvement in the company's baseline credit assessment to 11 from 12 (on a scale from 1 to 21 with 1 reflecting the highest and 21 the lowest). The improved baseline credit assessment has largely been a result of the Kazakhstan-China pipeline having come on-stream earlier this year, thereby reducing KazTransOil's dependence on Transneft and its existing major pipelines, and as a result of an improved tariff framework allowing faster tariff adjustments for investments.

The upgrade is further supported by KazTransOil's strengthened performance over recent years, which - apart from a risen crude oil price - also reflects the company's special status as the national oil pipeline owner and operator in Kazakhstan with monopoly position, its strategic and fiscal significance to the country, the fact that over 90% of its earnings are derived from the transportation of crude oil under a relatively generous tariff regime, its established customer base and relative price competitiveness, Moody's said.

However, the agency said ratings continue to be constrained by the company's heavy medium-term investment requirements to build out and improve the integration of its pipeline infrastructure, increasing competition from alternative oil transportation routes, political and concentration risk because KazTransOil connects to and transports via Transneft and contingent obligations associated with the involvement in the Kazakhstan-China Pipeline Co. LLP.

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