Fitch rates Kazakhstan's Condensate 'B-'; outlook stable
New York. December 4. Kazakhstan Today - Fitch Ratings has published Kazakhstan's JSC Condensate (Condensate) Long-term foreign currency Issuer Default Rating (IDR) of 'B-'. The Outlook is Stable.
According to Fitch's press release, "Condensate is a small, privately owned single-site refinery located in the north-west (NW) Kazakhstan region, with the annual capacity of 600,000 tons of gas condensate. It produces heavy distillate fuel and gasoil. In 2011 it had revenues of KZT36.8bn (USD248m) and EBITDA of KZT9.2bn. It does not currently have any debt, but plans to borrow up to USD160m for a refinery upgrade program. At the same time, competition is likely to increase due to National Company KazMunaiGaz's (NC KMG, BBB/Stable) upgrade of three Kazakh refineries. Fitch expects that leverage will reach 4x by 2015."
"Condensate's ratings are capped in the mid-to-low B rating category because of its small size and single site operations. Condensate's refinery has annual refining capacity of 600,000 tons of gas condensate, which mainly produces heavy distillate fuel and gasoil. Its actual refining throughput in 2011 was lower due to the use of crude oil as the primary feedstock. Condensate also owns crude and oil products rail terminals and depots for loading 2,000 m3 of oil products per day and crude and oil products pipelines from the refinery site to the depots. In 2011, Condensate generated revenues of KZT36.8bn, a 73% increase yoy, and EBITDA of KZT9.2bn," the press release reads.
"Condensate plans to upgrade the refinery to produce Euro-5 quality diesel fuel and gasoline with octane rating of 95 and higher (Phase 1, USD126m) and increase diesel fuel production by 175,000 tons (Phase 2, USD80m), for the total cost of USD206m. This would allow Condensate to improve profitability by increasing sales of higher value-added products (gasoline and diesel fuel with octane rating of 95 and higher) on the local market, which are currently imported from Russia," Fitch reports.
"Condensate estimates that the construction of the Phase 1, which entails installation of pre-fabricated US-made equipment to remove sulphur from finished products, will be completed in Q414; Phase 2 will be completed in Q415. Condensate plans to raise USD160m in debt to finance the refinery upgrade in bank loans from local banks and on bond markets. Based on its conservative rating case assumptions, Fitch expects Condensate's leverage to increase to about 4x from non-existing levels at end-2011 and coverage in the range of 3x by 2015," according to Fitch.
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National Bank of Kazakhstan maintains base rate at 14.75%
Annual inflation in February and March continued to decrease, albeit at a slower pace. Inflation expectations have slightly decreased but remain at a relatively high level. The external inflation background continues to be neutral with the ongoing trend of declining grain prices in global markets. Within the domestic economy, inflationary pressure persists due to robust internal demand and unanchored inflation expectations," reads the bank’s official statement.
In the current circumstances, there is still limited room for easing monetary policy. This space will begin to form with the stable reduction of the stable part of inflation," it said.
Monthly inflation slowed down in March to 0.7% after a spike in the previous month (1.1%), forming above the average historical values (0.6%). A similar dynamic is observed for the indicators of core and seasonally adjusted inflation - a significant reduction in March after a sharp acceleration in February," said the bank.
The external inflation background is neutral. The cost of food in global markets in March shows a slight increase, mainly due to rising prices for vegetable oils. Grain prices continue to decline against the background of the realization of the harvested crop in exporting countries and the uninterrupted operation of maritime trade routes," said the bank.
In the European Union, the trend towards slowing inflation continues against the backdrop of the European Central Bank's restrictive policy. Despite expectations of weaker economic growth indicators this year, the ECB remains committed to returning inflation to its target value and intends to maintain restrictive monetary and credit conditions for this purpose," said National Bank Governor Timur Suleimenov in an April 12 statement.
The Federal Reserve notes that inflation in the United States still remains high. In March, the annual inflation rate increased to 3.5%, accelerating for the second consecutive month. According to the Fed's rhetoric, the current monetary and credit conditions will continue going forward. In Russia - a key trading partner of Kazakhstan, inflation in March remained at 7.7%. According to the statement from the Russian regulator, achieving the inflation target involves a prolonged period of maintaining tight monetary and credit conditions," said Suleimenov.
Pro-inflationary risks are conditioned by the continuation of reforms in the area of regulated prices, the consequences of abnormal floods in Kazakhstan, and the uncertainty associated with the volumes of budget expenditures needed for their elimination," the bank said.
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