OCT. 26 2015 (The Conway Bulletin) -The value of Azerbaijan’s sovereign wealth fund Sofaz dropped by 6.4% to $34.7b between Jan 1 and Oct 1, it said, a decrease that highlights the impact of the fall in oil prices and collapse in the value of its manat currency. Sofaz earns revenues from oil and gas contracts.
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(News report from Issue No. 254, published on Oct. 30 2015)
JUNE 30 2015 (The Conway Bulletin) – The Kazakh Central Bank bought a 10% stake in Kazmunaigas from the country’s sovereign wealth fund Samruk Kazyna for 750b tenge ($4b), a move analysts said was designed to help the state- owned energy company pay off debts generated by a sharp fall in oil prices.
This is the second reorganisation of Kazmunaigas since June. It earlier announced the sale of half its 16.8% stake in the Kashagan oil project to Samruk-Kazyna for $4.7b.
Analysts at Halyk Bank, a Kazakh bank, said the latest move shifted debt once again from Kazmunaigas to Samruk Kazyna to the Central Bank.
“If the first transaction raised the net debt of Samruk-Kazyna, the second lowered Samruk- Kazyna’s net debt, and the credit risk. By divesting of Kazmunaigas, Samruk-Kazyna reduced the most expensive part of its debt,” Halyk Finance senior analysts Sabit Khakimzhanov and Gulmariya Zhapakova said in a note to clients.
Delays at Kashagan and a sharp fall in oil prices have worsened Kazmunaigas’ financial affairs.
But, although unprecedented, the Central Bank’s purchase will change little in Kazakhstan’s oil sector. The two transactions may have helped Kazmunaigas achieve a better financial position in the short term, but both moves are temporary.
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(News report from Issue No. 242, published on Aug. 7 2015)
JULY 3 2015 (The Conway Bulletin) – Azerbaijan’s State Oil Fund, or SOFAZ, said that it had bought $500m worth of Chinese yuan, part of a policy to diversify its assets.
The purchase will also endear Azerbaijan to China, another unsaid reason for SOFAZ to buy yuan. China has been boosting its interest in the South Caucasus over past few years and Azerbaijan is looking for more allies.
“In order to further broaden and diversify the currency basket, SOFAZ has started making investments in Chinese Yuan,” SOFAZ said in a statement on their website.
And that wasn’t all. SOFAZ said it was looking at further exposure to China.
“Going forward, SOFAZ is planning to gain exposure to Chinese equity markets,” it said.
Azerbaijan’s oil fund is important because at $37b it is one of the biggest investment funds in the world. Its mission is to act as a social fund for the government to dip into in special circumstances and to fund large infrastructure projects.
It has begun to diversify its investments and, over the past couple of years, has built up a property portfolio in Europe and Asia.
It has been planning to buy into China ostentatiously to further diversify its investments.
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(News report from Issue No. 239, published on July 9 2015)
JUNE 30 2015 (The Conway Bulletin) – Kazmunaigaz, Kazakhstan’s state-owned oil and gas company, said it would sell half its stake in the Caspian Sea Kashagan oil field to Samruk-Kazyna, the Kazakh sovereign wealth fund.
This is a curious arrangement as Samruk-Kazyna actually owns Kazmunaigas. It may be a way for Kazmunaigas, which has been badly hit by the sharp drop in energy prices, to borrow cash cheaply.
According to a press release from the London Stock Exchange, Kazmunaigas is seeking the consent of the shareholders in the North Caspian Operating Company (NCOC) , the consortium which operates the Kashagan, to sell half of its 16.88% share to Samruk-Kazyna for approximately $4.7b.
“Samruk-Kazyna’s agreement to purchase the Kashagan Shares reflects the State’s strong support of KMG (Kazmunaigas), as a strategic national asset,” the statement said.
Part of the cash raised by the sale would be used to pay $2.2b Kazmunaigas owes in fees relating to its 2013 purchase of the Kashagan stake from US company ConocoPhillips.
Kazmunaigas said that the sale would come with an option to buy back the stake in Kashagan for the same price between 2016 and 2020.
NCOC declined to comment.
Kazmaunaigas had run up large debts, partly because of the oil price slump. Halyk Bank analyst Sabina Amangeldi said in a note last month that the company already has seven Eurobond issues outstanding worth a total of $8.8b.
She also noted that lower oil prices had knocked Kazmunaigas’ revenues by around a third and that profit had been wiped out.
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(News report from Issue No. 238, published on July 2 2015)
MAY 1 2015 (The Conway Bulletin) – Azerbaijan’s State Oil Fund said its assets had dropped by 5% in the first three months of the year compared to the same period in 2014. Azerbaijan’s government is trying to push its way through a regional economic downturn and has said it will dip into its reserves to support various projects.
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(News report from Issue No. 230, published on May 6 2015)
APRIL 22 2015 (The Conway Bulletin) – Azerbaijan’s government will have to dip into savings built up in its Oil Fund to prop up its ailing economy, economists have said.
They said the Azerbaijani government will not cut the state budget sufficiently despite a massive fall in the price of oil and gas.
“If the government does not cut budget spending the only real way to cover the deficit will be calling back State Oil Fund’s reserves abroad, or the government must have another big devaluation,” Samir Aliyev, an independent economist at the monthly Economic Forum magazine, told the Bulletin.
At Dec. 31 2014, the Oil Fund was worth around $37b.
The downturn in energy prices since last summer has hit Azerbaijan hard. It devalued its manat current by a third this year.
Rovshan Agayev, an independent economist, also told the Bulletin that even during the financial crisis of 2008 the government did not increase spending from the National Oil fund.
“This is a result of mismanagement of the state budget money for many years,” he said.
The independent MP Vahid Ahmedov told RFE/RL it was acceptable for the government to use cash from the fund, created in 1999, to prop up the economy.
“What was the Oil Fund is created for?” he said. “To save some money for the future generation and as well as to help the economy in crisis times.”
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(News report from Issue No. 228, published on April 22 2015)
APRIL 4 2015 (The Conway Bulletin) – Kazakhstan’s sovereign wealth fund has spent $8b, or 10% of its total, over the past nine months supporting the tenge currency against devaluation pressure, media reported quoting official statistics. The size of the drop gives a good indication on the severity of the economic downturn.
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(News report from Issue No. 226, published on April 8 2015)
FEB. 20 2015 (The Conway Bulletin) — The growing financial crisis in Kazakhstan has now hit the country’s sovereign wealth fund, Samruk-Kazyna.
Umirzak Shukeyev, head of the fund, said the plan was to look to borrow up to $2.5b to refinance its debt.
“If conditions on external markets are attractive enough for us, we will tap foreign markets, although right now we see that the situation in the internal market is more favourable for us to borrow,” he said.
Regardless, Samruk-Kazyna’s insistence that it will need to borrow cash to restructure its debts is an important admission that the financial crisis is growing.
Like its neighbours, the slowdown in Russia’s sanction-hit economy and the drop in the price of oil has hit Kazakhstan hard.
Samruk-Kazyna holds about $100b in assets, roughly half Kazakhstan’s GDP, and manages about 500 companies.
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(News report from Issue No. 220, published on Feb. 25 2015)
>>Cycling team is closely linked to Kazakhstan>>
JAN. 27 2015 (The Conway Bulletin) — The disgraced former cycling champion Lance Armstrong told the BBC in an interview that cycling, including Astana Pro Team, was riddled with doping.
Mr Armstrong, who had cycled for Astana Pro Team, said the sport’s governing body, the International Cycling Union (UCI), should ban Astana Pro Team. The UCI placed Astana Pro Team under probation in December after another case of doping emerged involving two team members.
The Astana Pro Team management has strongly denied the allegations of doping.
The whole row will be embarrassing, though, for Kazakh President Nazarbayev.
Samruk-Kazyna, the Kazakh investment fund, sponsors Astana Team Pro. The team wears the blue and yellow national colours and companies and teams carrying the Astana brand, the name Mr Nazarbayev gave to his new capital, are closely linked to Kazakh nationality.
On the same day that the BBC aired its interview with Mr Armstrong, the Astana Pro Team manager Alexander Vinokourov visited Mr Nazarbayev at the presidential palace in Astana, presenting him with a yellow jersey, symbol of last year’s victory in the Tour de France — the most prestigious bike ride in the world.
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(News report from Issue No. 216, published on Jan. 28 2015)
NOV. 15 2014 (The Conway Bulletin) – Samruk-Kazyna, Kazakhstan’s national investment fund, has signed a $40m deal to sponsor the shirts of the top Istanbul football club Galatasaray, Turkish media reported. With the Kazakh economy under increased pressure, economists and ordinary Kazakhs may question the worth of the deal.
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(News report from Issue No. 209, published on Nov.19 2014)