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Published on 2/6/2009 in the Prospect News Emerging Markets Daily.

Fitch sees limited effect on Kazakh oil companies from tenge devaluation

Fitch Ratings said the recent devaluation of the Kazakh tenge is likely to have a limited impact on the credit metrics of the Kazakh oil and gas companies but warned that significant pressure on the local currency could result in a more pronounced credit impact for some entities in the sector.

"While the debt portfolios of the Kazakh oil and gas companies rated by Fitch are primarily USD-denominated, their revenue stream is generated mostly in foreign currency whereas their cost structure is skewed towards the national currency. This means they are less vulnerable to exchange rate shocks," Angelina Valavina, a director in Fitch's energy, utilities and regulation team, said in an agency report.

However, if the local currency remains under pressure and tenge devaluation continues in excess of 45% to 50%, Fitch said that other things being equal, its negative credit impact will become more pronounced for some companies in the Kazakh oil and gas sector such as KazTransGas (BB/stable), whose revenue is still exposed to the local currency fluctuations, and JSC KazTransOil (BBB-/negative), an oil pipeline operator whose tariffs are set in tenge.

The tenge was devalued by 18% on Thursday to 143.98 tenge per dollar from 121.87 tenge per dollar.


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