Kazakhstan’s sovereign wealth fund, Samruk-Kazyna, is preparing to float a stake in oil company KazMunayGas (KMG) to raise “hundreds of million of dollars”, which will help fund a pipeline of projects including the development of renewable energy.
“We will offer a discount to the valuation of KMG to broaden the investor base and increase interest,” Samruk-Kazyna Chief Executive Officer Almasadam Satkaliyev told Bloomberg in an interview. Presently, SK owns 90.42% of KMG and the National Bank of the Republic of Kazakhstan owns 9.58%. Preparations for the IPO are set to be complete by mid-October, paving the way for a listing by the year-end.
Past reports have suggested a dual listing in Nur-Sultan (Astana) and London. The last IPO of an SK-owned entity was Kazatomprom, the world’s largest uranium producer, in London and Nur-Sultan in 2018. However, Bloomberg claims that KMG shares “won’t be sold abroad after stoppages on the Caspian Pipeline Consortium, the main route for Kazakh oil exports, added to nervousness among foreign investors already spooked by Russia’s invasion” of Ukraine. As such, the IPO of the oil producer, which has a market capitalization of US$15.7 billion, is likely to be smaller than previously expected.
Representing around 40% of Kazakhstan’s GDP, the US$69 billion strategic fund holds national oil and gas, energy, mining, industrial, transport and telecommunications assets – and the government is looking to divest these holdings in months to come. The sovereign wealth fund’s privatization program for 2021-25 also planned to list Kazpost and Samruk Energo in 2021, but their divestments were put back by a year for the purpose of restructuring – and may not be listed in 2022. Alongside KazMunayGas, Air Astana, mining company Tau-Ken Samruk and Qazaq Air were slated for privatization in 2022 and railway company Kazakhstan Temir Zholy in 2023.
However, progress has stalled following the appointment of Almasadam Satkaliev in March 2021, substituting Akhmetzhan Yessimov, who had faced stern criticism from Kazakhstan’s accounts committee over a lack of transparency and falling profitability.
Satkaliev made it his mission to end secret business deals and poor transparency, as well as inflated prices. Under Samruk-Kazyna’s new procurement rules, contracts will no longer be handed out to the holding’s portfolio companies. Under an organizational overhaul prompted by President Kassym-Jomart Tokayev’s call for reform, earlier this year the Board reduced the number of management positions from 10 to five and changed rules for procurement. In April, it began recruitment to improve transparency and governance, just months after cutting half its staff to 124 personnel and closing offices in Beijing, Moscow and London and ahead of plans to divest portfolio companies.
The fund’s creation in 2008 was inspired by Singapore’s state-owned investor Temasek, with a focus on long-term value creation from government assets. The sale of assets will provide Samruk-Kazyna with capital for future strategic developments projects, , including renewables and agtech, which are set to involve close relationships with foreign state-owned investors.
Mubadala is set to become a major factor in the fund’s strategy. In February 2021, the Abu Dhabi investor’s green investment arm, Masdar, signed agreements with SK to explore joint initiatives in renewables. These included developing a 500MW wind farm project with operations beginning by end-2024. Oil-rich Kazakhstan aims to raise the share of renewables in electricity generation from 1% in 2020 to 10% by 2030 and 50% by 2050 by exploiting its huge wind and solar power potential.
French public investment bank Bpifrance is also set to become a long-term partner. At the end of October 2020, Samruk-Kazyna and Bpifrance announced the launch of a EUR100 million co-investment partnership for the development of bilateral trade. The agreement is dedicated to Kazakhstani, French, or joint-venture SMEs, and intermediate-sized companies operating in industry, agriculture, ecological and energy transition, education and health.
In October 2021, SK and Azerbaijan Investment Holding (AIH) signed a Memorandum of Understanding for an increased cooperation around not only the oil and gas sector, but also transportation and logistics in the context of the Belt and Road Initiative.
