The rating of "BBB-" indicates a sufficient level of the company's creditworthiness with low default risks. The agency notes that the likelihood of support from the city remains "extremely high" due to the strategic importance of the Almaty Social Entrepreneurial Corporation (SEC) for the socio-economic development of the metropolis. According to Fitch's methodology for government structures, the SEC "Almaty" scored 35 points out of a possible 60.
Financial Indicators of SEC "Almaty"
SEC "Almaty" is fully owned by the city, and its activities are overseen by a board of directors led by the akim. The corporation provides quarterly reports to local authorities. Fitch emphasizes that, at present, the city has no similar structures capable of performing the corporation's functions.
The agency also reminds that SEC "Almaty" is the only social entrepreneurial corporation in Kazakhstan with an international credit rating. SEC "Almaty" is comparable to international municipal institutions, such as SEMAPA in Paris and Hubei Science Technology Investment Group in China.
The corporation implements key city projects in the fields of small and medium-sized businesses, housing renovation, industrial zones, and stabilizing food prices. The SEC provides loans to businesses at low rates. According to Fitch, in 2024, the volume of budget loans from the corporation amounted to 12 billion tenge, while in 2022, the company received 61.4 billion tenge for housing renovation and infrastructure development.
As of the end of 2023, SEC "Almaty" had 69.7 billion tenge in cash, of which 48.8 billion tenge was held in a treasury account designated for city projects. The undistributed balance was 20.9 billion tenge.
The company's own credit rating (one of the components of the rating) is assessed at "b." Its operations depend on government decisions, making the corporation's revenues vulnerable. Major expenses are associated with construction projects, which are exposed to inflation and material cost risks. By the end of 2023, SEC "Almaty" had a debt of 15 billion tenge (budget loans at a rate of 0.01% per annum), of which 8 billion tenge will be repaid in 2024, while new borrowings amounted to 5 billion tenge.
Agency Forecasts
Fitch forecasts an increase in the net debt/EBITDA ratio to 9.1x by 2028 due to the expansion of construction and lending programs. Operating revenue may grow by 18% annually, while expenses may increase by 19%. Capital investments will average around 16.5 billion tenge per year.
From 2015 to 2021, the company recorded losses due to the fulfillment of social obligations. Its rating remains one notch below that of the city, which aligns with the agency's practice regarding government structures.
The agency warns that it may downgrade the rating if the ties with the city weaken and the support score falls below 35, as well as if the rating of Almaty decreases. The rating could be upgraded if the metropolis's rating increases, support from the akimat strengthens, and the corporation's financial indicators significantly improve.