KazMunaiGaz May Shun Oil Fund for Cheaper Borrowing Abroad

KazMunaiGaz National Co., Kazakhstan’s state energy producer, may cancel plans to raise $2.5 billion by selling bonds to the National Oil Fund next year as borrowing abroad could be cheaper.

KazMunaiGaz, which has received initial approval from the government to tap the oil fund, may borrow abroad “if it’s less expensive,” Nurlan Rakhmetov, a managing director of the Samruk-Kazyna sovereign wealth fund that owns the energy producer, said in an interview yesterday from the capital of Astana.

Near-zero interest rates in the U.S. and Europe are spurring record borrowing worldwide, with emerging market issuers selling $1.15 trillion of bonds so far this year, a 43 percent jump from the same period in 2011, data collected by Bloomberg show. Russia’s state-owned oil company OAO Rosneft sold $3 billion of bonds to international investors Nov. 29, the biggest offering of foreign debt by a Russian corporation on record.

Samruk-Energy JSC yesterday sold five-year bonds with a yield of 3.75 percent. Development Bank of Kazakhstan JSC, a state-owned lender, last month sold $1 billion of 10-year bonds at a yield of 4.326 percent.

The yield on KazMunaiGaz’s dollar-denominated notes due in 2020 fell seven basis points to 3.222 percent today, according to data compiled by Bloomberg.

Selling Bonds

KazMunaiGaz, which accounts for about a quarter of the nation’s oil output, planned to raise $2.5 billion selling bonds to the National Oil Fund in 2013, and $1.5 billion from the oil fund in 2015, it said in March. The company said at the time it was in talks with the government about the interest rate.

KazMunaiGaz will borrow from the oil fund mainly to refinance debt it issued to invest in the development of the Kashagan project, Rakhmetov said. The company has about $3.1 billion of debt due by the end of next year, out of a total of $13.7 billion outstanding, according to data compiled by Bloomberg.

KazMunaiGaz’s net income is estimated at about 358 billion tenge ($2.38 billion) this year, Rakhmetov said. The company wants to sell non-core assets with a paper value of 95 billion tenge, and has already raised 12.7 billion tenge from sales to date, he said.

-- With assistance from Denis Maternovsky in Moscow. Editors: Stephen Cunningham, Amanda Jordan.

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