Central bank to keep its stake as Kazakh oil major plans IPO

Bloomberg

The era of quantitative easing and emergency measures has left central banks with trillions in assets. In the case of the National Bank of Kazakhstan, it ended up with 10 percent in the country’s state oil company.
Even as KazMunayGas National Co. prepares an initial public offering by 2020, the central bank will “stay a shareholder” and the question of its exit isn’t now on the agenda, according to Kazakhstan’s sovereign wealth fund Samruk-Kazyna, which owns the rest of the energy producer. In 2015, the central bank stepped in by spending 750 billion tenge — which at the time equaled about $4 billion — to purchase the stake and help Samruk-Kazyna defuse the risk of KazMunayGas’s net debt to Ebitda ratio breaching its Eurobond covenants.
“It’s definitely not an obstacle for the IPO,” Berik Beisengaliyev, a management board member at Samruk-Kazyna, said in an interview, calling the arrangement “comfortable” for both sides. “We may possibly return to this issue sometime in the future.”
Kazakhstan’s oil champion, responsible for almost a third of the nation’s crude production, racked up so much debt that its finances teetered two years ago when commodity prices collapsed. At the height of the crisis, Samruk-Kazyna paid $4.7 billion for half of KazMunayGas’s stake in Kashagan, the world’s costliest oil development, before clinching the deal with the central bank.
KazMunayGas is among most prized assets that Kazakh may put up for sale as part of its biggest ever privatization program. Alongside power generator Samruk-Energo, it’s slated to be offered as part of ‘second wave’ of IPOs planned by government, said Beisengaliyev, who’s also managing director of asset optimization at Samruk-Kazyna.
Ahead of the possible share placement, he said the focus will be on reducing the company’s external debt, which is now at $10 billion, down from $15 billion in 2015. Samruk-Kazyna has no plans to sell its stake in Kashagan, according to Beisengaliyev.
“The work toward lowering KazMunayGas’s debt burden will continue,” Beisengaliyev said.
Assets for sale include stakes in KazMunayGas-Service, which controls the Kempinski Hotel in Turkey, Kazmortransflot and Euro-Asia Air, the largest operator of helicopters in Kazakhstan, according to Samruk-Kazyna.
KazMunayGas also sold $2.75 billion of bonds last month. S&P Global Ratings in April described KazMunayGas’s financial-risk profile as “highly leveraged,” with negative free operating cash flow and “relatively weak financial metrics due to high debt.” Still, its “performance has stabilized following oil-price and exchange-rate stabilization,” S&P said.