Kazakhstan Electricity Grid Operating Co. (JSC)

The stable outlook on KEGOC reflects S&P Global Ratings' view that the current improvement in KEGOC's financial performance, with funds from operations (FFO) to debt comfortably above 30%, is sustainable. It also reflects our view that the company will maintain adequate liquidity, avoid large capex significantly above our current base case, and that dividend pressure will not materially exceed 100% of net income (maximum per current dividend policy). Our view of KEGOC as a GRE means we believe it will remain important and operationally close to Kazakhstan's government. In addition, we anticipate that the company's operations will continue to benefit from ongoing government support. We view rating upside as limited at this stage. Improvements in the company's SACP by one

...Despite the regulator's freeze on 2019 tariffs, we expect Kazakhstan Electricity Grid Operating Co. (KEGOC) will report healthy EBITDA in 2019-2020. In December 2018, the regulator announced it would freeze KEGOC's transmission tariffs for 2019, although it previously approved 10% growth for the 2016-2020 regulatory period. We believe the regulator aims to compensate for increases in electricity prices for end consumers following introduction of the capacity market in Kazakhstan from Jan. 1, 2019. This supports our view that regulation in Kazakhstan remains unpredictable and politicized. KEGOC's S&P Global Ratings-adjusted EBITDA for the first six months of 2018 amounted to Kazakhstani tenge (KZT) 46 billion (about 110 million), and we expect the company to generate EBITDA of about KZT80 billion-KZT85 billion for full-year 2018, versus KZT73.5 billion in 2017. We expect the tariff freeze will be prolonged until 2020 and forecast moderate EBITDA of KZT70 billion-KZT75 billion in 2019-2020....

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