Air Astana IPO To Rekindle Investor Love For Kazakhstan

KMG sold Euro-Asia Air company within frameworks of privatization

Kazakhstan is looking to lure foreign capital to offset the impact of falling commodity prices and low growth. The flotation of Air Astana for up to $1bn may attract investors who have steered clear of the central Asia economy.

Kazakhstan is struggling to convince global investors to put their capital to work in the Central Asian state after being hit by low oil and commodity prices, rising spending and low growth.

Investors and bankers say the clearest path to putting Kazakhstan back on the investment map will be via a series of sizeable stock listings of leading Kazakh firms, planned for the months ahead. The procession will be led by Air Astana, which is planning a dual initial public offering which could net the national flag carrier Air Astana upward of $500m, bankers said.

The IPO, which is unlikely to be completed before the first half of 2017, will likely see shares sold in the Kazakh capital Astana, and on a second bourse, with London seen leading the pack, ahead of Hong Kong and Singapore. Air Astana is owned 51% by sovereign wealth fund Samruk-Kazyna, with the rest controlled by Britain’s BAE Systems.
“They should raise between $500m and $1bn,” said one banker involved in discussions with the Kazakh government. “But it all depends on timing and execution. If they get it right, it will transform how the global investment community views Kazakhstan.”

Astana’s image among global investors has been hit hard by last year’s devaluation of Kazakhstan’s currency, the tenge, and by a series of scandals undermining Kazakh firms listed abroad.

Other IPOs planned for 2017 and 2018 include domestic energy major KazMunaiGas, uranium producer Kazatomprom, and railway monopoly Temir Zholy. The sale of one or all of those major state firms will go a long way to raising the $6bn the government is targeting to help Astana fill a yawning hole on its budget, caused by the longstanding decline in resources prices, and to meet its social security spending needs.

Officials also pointed to the importance of the “One Belt, One Road” project, a $4tr-plus project to link China with Europe overland, via Central Asia, Russia and the Middle East Janet Heckman, country director for Kazakhstan, at the EBRD, said OBOR was “critical to everything we are doing in Kazakhstan, especially now you are seeing commercial corridors being built through Iran and Pakistan, and increased shipping transiting the Caspian Sea, all of which is part of OBOR”.

Michael Sauer, chairman of Almaty-based investment bank Visor Capital, said Chinese investment was transforming the region’s economic prospects. “Some of these economies are just a few billion dollars,” he said.

“Add in a few billion from the various Chinese lending institutions, such as the $40bn Silk Road Fund , and you’re already adding a few percentage points to economic growth. This is where the growth is going to come from in Kazakhstan and around Central Asia in the years to come.”