Research Update: KEGOC 'BB+' Rating Affirmed On Metrics Improvement Despite Sizable Investment Program; Outlook Stable

We expect tariff increases and favorable regulatory changes to result in improving EBITDA generation of Kazakhstani tenge (KZT) 100 billion in 2023 and KTZ120 billion–KTZ130 billion in 2024-2025. We further expect funds from operations (FFO) to debt to peak above 45%, before stabilizing at around 30% by 2026 as the company will need to accumulate debt to finance heavy capital spending (capex). We further note scope for additional tariff revision by 2025, which could compensate for the sizable investment program, offsetting expected debt accumulation and supporting metrics. As a result, we revised our assessment of Kazakhstan Electricity Grid Operating Co. (JSC)'s (KEGOC's) stand-alone credit profile (SACP) to 'bb' from 'bb-'. We affirmed our issuer credit rating on KEGOC at 'BB+',

...- We expect tariff increases and favorable regulatory changes to result in improving EBITDA generation of Kazakhstani tenge (KZT) 100 billion in 2023 and KTZ120 billion¡KTZ130 billion in 2024-2025. - We further expect funds from operations (FFO) to debt to peak above 45%, before stabilizing at around 30% by 2026 as the company will need to accumulate debt to finance heavy capital spending (capex). - We further note scope for additional tariff revision by 2025, which could compensate for the sizable investment program, offsetting expected debt accumulation and supporting metrics. - As a result, we revised our assessment of Kazakhstan Electricity Grid Operating Co. (JSC)'s (KEGOC's) stand-alone credit profile (SACP) to '##' from '##-'. - We affirmed our issuer credit rating on KEGOC at '##+', accounting for extraordinary government support. - The stable outlook reflects our view that KEGOC will keep FFO to debt comfortably above 30%, even at the peak of the investment cycle, despite debt...

Research Update