KazMunaiGas’ IPO: Why Has It Been Put on Hold

The KazMunaiGas JSC’ announcement released on April 25, 2019 on the national company’s website in response to the media publications has attracted little attention inside the country. In the meantime, it is worth noticing if for no other reason than the fact that we are talking about one of the most valuable and high-priced assets owned by the state.

Here is the entire text of the announcement (text in bold by kz.expert).

“KazMunaiGas JSC NC (hereinafter KMG or the Company), the national company specializing in the exploration, extraction, refinery and transportation of the hydrocarbons, has lately been noticing the discussions of the company’s IPO in the media. KMG confirms that it is continuing to explore the possibilities for sustaining the growth and the development of the Company including a potential IPO. However, the final decision on carrying out this transaction including its possible structure, timeline and consultants has not been made. KMG will inform the market on the future decisions in an orderly fashion in accordance with the regulatory requirements.

KMG intends to implement the growth strategy and to integrate the best international practices in all the Company’s operational fields as well as to further solidify its financial standing.

In particular, in the years 2017-2018, the Company:

  • bought out the ordinary and preferred free-floating shares of its publicly traded subsidiary KazMunaiGas Exploration Production JSC and integrated them in their entirety;
  • changed the terms of the Eurobonds which allowed to conduct KMG’s IPO;
  • completed a series of the major projects including the modernization of the refineries, the construction of the gas transportation capacities, the transformation of several internal business-processes and systems that allows to receive significant advantages over the medium term;
  • continued to improve the profile of the generated free cash flow;
  • increased its general financial stability which can be confirmed by the fact that the Standard&Poor’s rating agency increased the Company’s credit rating from BB- to BB in November 2018”.

Meanwhile, a little earlier, on March 15, 2019, Chief Executive Officer of the Astana International Exchange (AIX) Timothy Bennett announced the dates of the IPO of three national companies including KazMunaiGas JSC NC. According to him, the Ministry of Finance of the Republic of Kazakhstan has decided that the IPO of the latter is to take place in the second quarter of 2020.

We believe the discussion of KazMunaiGas’ IPO in the press that, in its turn, became the reason for the national company’s April 25 announcement has to do not only with the fact that it is one of the most crucial elements of the state property privatization and foreign investment attraction programs. The thing is that, at the moment, Akorda is trying to find an answer to an extremely intricate question – who is to become the company’s major co-owners.

Even though KazMunaiGas’ IPO will be open to the public, the Kazakh authorities can, nonetheless, have an influence on it. For it will be up to the issuer to decide who is to manage the listing at the stock exchange and, therefore, negotiate with the latter on the matter of giving preferential treatment to a buyer. And the said agreement can be implemented via the listing.

Based on the information provided by our insiders, the unofficial competition between the future private shareholders of KazMunaiGas JSC NC has gotten extremely fierce. And not only because this is an asset that provides a high income and that in the context of the deficit of high-quality domestic investment projects. Also, there are two very significant circumstances of the non-economic nature that are at play here.

First, there is an acute desire of certain very wealthy people from among the First President’s inner circle to save their money and other assets from the scrutiny of foreign law-enforcement agencies, investigative organizations and journalists. And, thus, to significantly lower the risks of both the disclosure of the real size of their fortunes as well as the confiscation of the said fortunes due to the fact that they have been acquired via illegal means.

Second, there is the beginning of the power transit in Kazakhstan that may end much earlier than we think. And then the “window of opportunity” for these people would be shut.

In other words, the purchase of KazMunaiGas’ shares would allow these extra-VIP folks to solve several problems at one stroke:

  • to invest very large sums of money in the asset capable of generating good dividends;
  • to avoid the ever-toughening inspections in foreign banks and financial organizations related to the legality of the money origin;
  • to move the stolen or the not-too-honest money from out of reach of foreign regulatory, supervisory and law-enforcement state agencies into the realm they can control;
  • to hide their real fortunes from everyone both inside their own country and abroad;
  • to lower the risks associated with the transfer and acceptance of legacy in the case of the death of the current asset owners.


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