Kazakh Wealth Fund Says Over 120 Firms Sold In Privatization Drive

Wealth Fund Rid of `Pocket Change' Readies Flurry of Kazakh IPOs

Kazakhstan’s $67 billion sovereign wealth fund Samruk-Kazyna has sold over 120 small and mid-sized firms by electronic auction and is preparing larger firms for sale under its privatization program, a managing director of the fund said on Wednesday.

Berik Beisengaliyev, managing director for assets optimization, declined to disclose any of the buyers’ names but said the process of selling the fund’s small- and mid-sized firms should be completed by 2018.

He said there were still about 35-40 such companies left to be sold out of the 172 originally earmarked for sale via online auction. “Some of the small companies were liquidated,” he told Reuters in London through a translator.

He said the emphasis was now shifting to the larger companies on Samruk-Kazyna’s books, including flagship carrier Air Astana, uranium producer Kazatomprom, Samruk Energy and KazMunayGaz (KMG).

Oil-rich Kazakhstan was hit hard by the fall in world oil prices from a high of $115 in June 2014 to around $55 a barrel today. Its ambitious privatization push aims to reduce the presence of the state in the economy to 15 percent by 2021.

For Samruk-Kazyna, it will mean publicly listing or selling stakes in some of the fund’s crown jewels, to generate cash for investment in mining, oil and gas production or the petrochemicals industry, or to pay down debt.

Astana and Kazatomprom are slated to list first, followed by Samruk Energy and KMG in a second wave, then Kazpost and railway operator Kazakhstan Temir Zholy in a third wave, Beisengaliyev said.

Beisengaliyev, who was in London to speak at a Samruk-Kazyna investor day, said he had seen “huge interest” for Air Astana and Kazatomprom from investors: “We saw a very positive mood in the market.”

KAZATOMPROM OPTION

A final decision on where the companies will list, or whether they will seek dual listings, has not yet been made.

He added that it was also too early to say if Kazatomprom would exercise its put option on its 10 percent stake in Westinghouse Electric, the U.S. nuclear firm that has just filed for bankruptcy.

This option falls due on October 2017, and Beisengaliyev said a decision would be taken nearer the time.

Stakes in Kazakhtelecom, mining company Tau-Ken Samruk and domestic carrier Qazaq Air are being prepared for sale to strategic investors. TauKen, which is 100 percent owned by Samruk-Kazyna, was originally included in the list of companies expected to go to initial public offering (IPO).

“Given the size of the company and its readiness for privatization, we took the decision that a sale to strategic investors would be more appropriate to consider than an IPO,” Beisengaliyev said.

Stakes in another 36 core companies are also expected to be sold to strategic investors – likely to be best-in-class industry players who will be able to offer technical expertise to help improve the firms, he said.

To make the companies more appealing to potential buyers, attempts are under way to restructure the debt, hire quality managers and improve corporate governance.

This transformation program extends across Samruk-Kazyna’s portfolio, with the aim of generating 1 trillion tenge ($3.21 billion) in cost savings by 2020, he said.

As part of this rationalisation, some unprofitable companies are being liquidated or merged.

Beisengaliyev said the aim was to reduce the number of companies in the fund’s portfolio to 300 by the end of 2017 with just five management layers, down from 404 companies in January.

It has already cut the number from 600 companies and nine management layers in 2014.

By Claire Milhench, Reuters

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