MOODY'S AFFIRMS RATING OF NUR-SULTAN AT ВАА3, OUTLOOK CHANGED FROM "STABLE" TO "POSITIVE"
/Moody's Investors Service, London, 23.08.19, heading by KASE/ – Moody's 
Investors Service affirmed the Baa3 issuer rating of Nur-Sultan, City of (Nur-
Sultan) and changed the outlook on the rating to positive from stable. At the 
same time, Moody's lowered the city's baseline credit assessment (BCA) to ba1 
from baa3.

Today's action follows Moody's rating action on August 22, 2019, in which the 
agency affirmed Kazakhstan's government bond rating of Baa3, and changed 
the outlook to positive from stable (For full details, please see 
"https://www.moodys.com/research/--PR_402812";).

RATINGS RATIONALE

The affirmation of Nur-Sultan's Baa3 issuer rating reflects high alignment of
its  finances with those of the national government, as well as the city's
strategic  importance in the national context. Being the capital of Kazakhstan,
Nur-Sultan  is enduringly linked with the national government via close
institutional,  economic and financial links. These links have strengthened in
recent years as the city's population continues to grow rapidly and it becomes
the home to a  greater number of large corporations and government institutions.
Given these  linkages, and the fact that the national government is the city's
largest creditor,  Moody's continues to incorporate a strong level of
extraordinary support from  the national government to Nur-Sultan, in the event
the city were to face acute  liquidity stress. While reporting healthy operating
balances, the city remains  largely dependent on the sovereign for its capital
expenditures. Therefore, the  expected improvement in the national government's
credit strength signals  increasing capacity of the national government to
assist Nur-Sultan in accommodating its rapidly growing population via budget
transfers. The above considerations suggest no major difference in the credit strength of Nur-Sultan 
and that of the national government, triggering the corresponding change of the 
outlook on the city's rating to positive from stable.

While the improving operating environment, as reflected in the positive outlook 
on the sovereign rating, exerts upward pressure on Nur-Sultan's own credit 
strength, Moody's notes the marginal weakening of the city's financial metrics
in recent years, as seen by some deterioration in operating balances and 
increased debt burden. The city's net direct and indirect debt increased to 65% 
of operating revenues in 2018 up from 34% in 2015, as a result of bond 
issuances needed to finance the previously sharp increase in capital spending. 
Additionally, recently revealed financial difficulties at Astana LRT LLP, Nur-
Sultan's vehicle for development of the city's transport infrastructure, adds 
stress to the city's stand-alone credit strength as represented by the BCA. The 
marginal weakening in financial metrics and the recent challenges at Astana 
LRT LLP led Moody's to lower the city's BCA to ba1 from baa3.

– WHAT COULD CHANGE THE RATINGS UP/DOWN

An upgrade of the sovereign rating could exert upward credit pressure on Nur-
Sultan provided its budget performance remains in line with Moody's current 
forecasts.

Given the change of the outlook to positive, negative credit pressures are 
unlikely to develop for Nur-Sultan. At the same time, any unexpected 
deterioration in the city's credit metrics, i.e. unexpected revenue declines or 
increased expenditures resulting into growing operating deficits and rising debt
burdens, could exert downward pressure on the city's ratings or outlook. 
Additionally, further financial difficulties at Astana LRT LLP or other
city-owned  enterprises could also apply downward pressure on the city's
rating.

The sovereign action required the publication of this credit rating action on a 
date that deviates from the previously scheduled release date in the sovereign 
release calendar, published on www.moodys.com

Sovereign Issuer: Kazakhstan, Government of

GDP per capita (PPP basis, US$): 27,550 (2018 Actual) (also known as Per 
Capita Income)

Real GDP growth (% change): 4.1% (2018 Actual) (also known as GDP 
Growth)

Inflation Rate (CPI, % change Dec/Dec): 5.3% (2018 Actual)

Gen. Gov. Financial Balance/GDP: 2.7% (2018 Actual) (also known as Fiscal 
Balance)

Current Account Balance/GDP: 0% (2018 Actual) (also known as External 
Balance)

External debt/GDP: 91.8% (2018 Actual)

Level of economic development: Moderate level of economic resilience

Default history: No default events (on bonds or loans) have been recorded 
since 1983.

SUMMARY OF MINUTES FROM RATING COMMITTEE

On 21 August 2019, a rating committee was called to discuss the rating of the 
Nur-Sultan, City of. The main points raised during the discussion were: The 
issuer's economic fundamentals, including its economic strength, have not 
materially changed. The issuer's governance and/or management, have 
materially decreased. The issuer's fiscal or financial strength, including its
debt  profile, has materially decreased. The systemic risk in which the issuer 
operates has not materially changed.

The principal methodology used in this rating was Regional and Local 
Governments published in January 2018. Please see the Rating Methodologies 
page on www.moodys.com for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this
credit rating action, if applicable.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this
announcement provides certain regulatory disclosures in relation to each rating 
of a subsequently issued bond or note of the same series, category/class of 
debt, security or pursuant to a program for which the ratings are derived 
exclusively from existing ratings in accordance with Moody's rating practices. 
For ratings issued on a support provider, this announcement provides certain 
regulatory disclosures in relation to the credit rating action on the support 
provider and in relation to each particular credit rating action for securities
that  derive their credit ratings from the support provider's credit rating. For
provisional ratings, this announcement provides certain regulatory disclosures 
in relation to the provisional rating assigned, and in relation to a definitive
rating  that may be assigned subsequent to the final issuance of the debt, in
each  case where the transaction structure and terms have not changed prior to
the  assignment of the definitive rating in a manner that would have affected
the  rating. For further information please see the ratings tab on the
issuer/entity  page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support
from  the primary entity(ies) of this credit rating action, and whose ratings
may  change as a result of this credit rating action, the associated regulatory 
disclosures will be those of the guarantor entity. Exceptions to this approach 
exist for the following disclosures, if applicable to jurisdiction: Ancillary 
Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating 
analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for 
additional regulatory disclosures for each credit rating.

*The full press release is available on Moody's website.

[2019-08-27]