In the midst of uncertainties caused by the spread of Covid-19, Kazakhstan’s sovereign wealth fund (SWF) Samruk-Kazyna is as determined as ever to carry out its state assets privatisation programme. This was the message from managing director of logistics and international cooperation at Samruk-Kazyna Yerzhan Tutkushev at the Kazakhstan Global Investment Forum 2020.
During a panel discussion on the opportunities on offer in the country’s privatisation programme, Tutkushev said that Covid-19 has had an impact on the schedule but not on commitment.
The SWF is in fact currently preparing the strategic sale of national postal service company Kazpost.
Kazakh privatisation programme aims for better efficiency
The Kazakh state assets privatisation programme was launched in 2016 with the ambitious target of reducing the government’s share in the economy to 15% by 2020.
The ultimate goal of the programme is to increase the efficiency of Kazakhstan’s economy by transferring state assets to private investors, supporting their development and enhancing performance and returns.
This in turn aims to, among other things, reduce state regulation of business; foster the country’s investment climate; enhance access to capital; and strengthen corporate governance, transparency and the financial performance of companies. So far, 138 assets have been sold and 29 more are in the process of being sold.
During the panel discussion, Tutkushev sounded satisfied with the results achieved so far.
“This is a large-scale, unprecedented programme for Kazakhstan,” he explained. “Four years ago, the government owned 600 companies with nine underlying subsidiaries levels. Since then, we managed to halve that to 300 companies with six lines of subsidiaries.”
However, the Covid-19 pandemic has had some level of impact on both a number of sectors in Kazakhstan and its privatisation drive. While initial public offerings (IPOs) may have proven to be a successful route to privatisation for the Kazakh government so far, the pandemic has hit some areas of the IPO market. Oil and gas, transport and logistics have been particularly badly hit, although telecoms and renewable energy have proven resilient, according to Tutkushev.
A tale of two companies
The IPO in 2018 of national uranium producer Kazatomprom was a success for Kazakhstan’s privatisation programme. Samruk-Kazyna sold a 15% share in the company on the Astana Stock Exchange and London Stock Exchange, raising $450m. The IPO was followed by two secondary placement offers in 2019 and 2020 that took the private share in the company to 25%.
As Kazatomprom continues to work on post-IPO marketing, chief financial officer Merzhan Yussupov told the privatisation panel at the Kazakhstan Global Investment Forum 2020 that the IPO led the company to an important change of policy.
“Kazatomprom’s uranium production will from now on be dependent on market demand,” he said. “This is a completely different approach from the previous policy of producing more and more uranium regardless of market condition. This makes us more responsible and sustainable producers.”
Kazatomprom was not badly hit by Covid-19. Yussupov explained how the sector continued to attract investors during the pandemic.
“Demand for uranium has remained pretty stable during the pandemic, with interest continuing to come, especially from China and India,” he told the panel. “We expect a steady increase in nuclear demand going forward, which will clearly favour our company.”
National oil and gas company KazMunayGas’s (KMG’s) public listing was scheduled for 2020, but Covid-19 and the sharp decline in oil prices meant that the IPO was postponed until 2022.
“While the pandemic and the dip in oil price has forced us to push our IPO back to 2022, we continue working towards this goal in different ways,” KMG director of business development Mukhtar Avutbayev told the panel.
In total, 58 assets were included in the company’s divestment plan. Of these, eight have been sold and liquidated, including KMG’s gasoline retail business, securing $138.3m (Tg60.6bn), while 50 assets remain for disposal by 2028.
The company plans to sell four non-core assets before the end of 2021, including a five-star hotel in Turkey, and to fully wind up four other companies.
Avutbayev also highlighted how KMG has worked towards strengthening its position in debt markets through successful refinancing programmes.
The feasibility of the IPO in 2022 depends upon the conditions within the markets, specifically the IPO market. As any recovery is not guaranteed, other routes to privatisation might be explored.
Asked about this during the panel, Samruk-Kazyna’s Tutkushev said: “KMG is a state-owned company, so all decisions will be taken with the government. We will, however, be transparent should we decide to pursue other opportunities.”