Kazakhstan Tees Up Asset Selloff to Raise More Than $6 Billion

  • Government readying sale of state companies after crash in oil
  • Wealth fund sees ‘huge interest’ from investors around world

The countdown is on for the biggest wave of privatization in the history of Kazakhstan.

Authorities are targeting proceeds at more than $6 billion to $7.3 billion, the balance-sheet value of assets held by the companies they plan to offer, according to Berik Beisengaliyev, a management board member at Kazakhstan’s sovereign wealth fund Samruk-Kazyna. Seven sales -- which will include KazMunaiGaz National Co., uranium producer Kazatomprom and railway monopoly Kazakhstan Temir Zholy -- will take place via initial public offerings, he said in an interview.

“We see huge interest from the side of investors in the U.S., Europe, the Middle East and Southeast Asia,” Beisengaliyev, who’s also managing director of asset optimization at the fund, said on Wednesday in the capital, Astana. The plans are garnering attention “even though we haven’t yet begun active implementation and are still at the stage of preparation.”

Privatization is in the spotlight for Kazakhstan after the worst oil crash in a generation clobbered the public finances of the second-largest energy producer in the former Soviet Union. Samruk-Kazyna gained assets accounting for about half of the Central Asian nation’s economic output after bailing out banks and companies hurt by a financial crisis in 2007-2009.

Two Lists

The planned selloff will include a list of 173 smaller assets, which will be made available starting this year through electronic auctions, and another lineup of 44 companies of “national scale,” according to Beisengaliyev. The larger offerings will take place from 2017 until end-2018, with the exception of IPOs, which won’t start before 2018 and may last until 2020, he said.

Consultants will be selected for each asset valued at more than 5 billion tenge ($15 million), and most will be hired by the end of this year, Beisengaliyev said.

While dual listings aren’t ruled out, Kazakhstan will favor domestic share sales, the official said. An IPO of KazMunaiGaz National Co. can take place without a de-listing of its London-traded unit, KazMunaiGas Exploration Production, he said.

Energy, Airline

Under the agreement to sell KazMunaiGaz’s unit that controls Rompetrol Group NV, a Chinese buyer is purchasing 51 percent for $680 million and pledging to invest $3 billion during a short period in Romania’s second-biggest oil company without diluting the stake held by KazMunaiGaz, according to Beisengaliyev.

Power generator Samruk-Energo will probably hold an IPO in 2019, Beisengaliyev said. Regardless of the outcome of privatization, Kazakhstan also wants to retain a 51 percent stake in the country’s flagship carrier, Air Astana, to comply with international agreements, he said. Shares in the airline will probably be offered in 2019 or 2020, he said.

Authorities will divest stakes of no more than 25 percent in the companies sold through IPOs, with the state maintaining control, he said. Besides IPOs, Samruk will consider proposals from investors for selling the assets by other means if they are deemed “economically interesting,” Beisengaliyev said.

Kazakhstan will adopt an “individual” approach to each asset sale, he said. The proceeds will largely go to repay domestic or foreign debt of the companies being privatized, including their borrowing from the National Fund, where the government channels most of its oil revenue.

The nation has a “clear ideology of privatization,” according to Beisengaliyev. That includes maximizing value over speed, giving equal access to all investors and maintaining the government’s control over strategic assets, he said.

“We are more interested in strategic investors,” he said. “National interests are above short-term benefits.”

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