In addition Fitch has assigned ICA foreign and local currency Issuer Default ratings (IDR) of ‘BB+’ and a Short-term foreign currency rating of ‘B’. At the same time, the agency has assigned holding company KazTransGas (KTG) foreign and local currency IDRs of ‘BB’ and a Short-term foreign currency rating of ‘B’. The Outlooks on the IDRs are Stable.

The Stable Outlook incorporates the continued strategic importance of ICA and KTG to the country’s gas network transportation and distribution. As such, Fitch would expect the companies to enjoy continued support from the state in terms of regulation and tariffs. ICA also plays a key role in the transportation of gas from Turkmenistan to Russia as Gazprom (‘BBB-‘/Positive) increases its reliance on natural gas imports from Central Asia to meet both domestic and specifically export demand.

The ‘BB+’ IDR for ICA reflects the company’s strategic position in the Kazakh gas transit business and support from its ultimate owner National Company KazMunayGas. It also takes into account an expected increase in financial leverage due to ICA’s sizeable investment projects. The rating is based on ICA being the main operating entity and profit centre for the group, accounting for around 75% of total assets. As such, compared to KTG, creditors benefit from better direct access to cash flow and tangible assets in the event of liquidation.

KTG is a holding company that, in addition to ICA, has interests in gas distribution as well as power and heat. ICA creditors benefit from the large amount of group assets held in this entity, whilst KTG creditors do not benefit from direct access to ICA assets. Additionally, ICA’s profit margins and credit metrics are stronger than KTG’s. It is for these reasons that KTG’s IDR is one notch lower than ICA’s.

ICA is a fully owned subsidiary of KTG and the monopoly operator of gas transportation pipelines in Kazakhstan. ICA manages the network of gas pipelines in Kazakhstan on the basis of a 20-year concession agreement with the government valid until 2017. ICA’s total (both domestic and export) gas transportation volume plan for 2007 is 124.8 bcm.

KTG manages the business of transportation of natural gas through the main gas pipelines, performs gas trading on domestic and external markets, and carries out development, financing, construction and gas storage. In addition, KTG is also responsible for natural gas production and distribution to the local market as well as the sale of heat and electricity via its Almaty Power subsidiary.