Emerging markets bankers are eyeing a series of privatisations in Kazakhstan as the government implements a programme of economic and political reform launched by outgoing president Nursultan Nazarbayev.
First on the block is likely to be a multi-billion dollar flotation of KazMunayGas (KMG), the state-owned oil and gas giant that is majority-owned by Samruk-Kazyna, Kazakhstan’s sovereign wealth fund.
“KazMunayGas is gearing up for an IPO in the second quarter of 2020,” said an investment banker who has met with Samruk-Kazyna in recent weeks. “My sense is that the oil price is going to remain supportive, which will benefit the deal.”
Rising global oil prices make KMG an attractive opportunity for investors, and potential growth in Kazakh production could make it an even more enticing opportunity.
Expansion of Kazakhstan’s most important oil field in Tengiz, a larger surface area than Paris and the world’s deepest producing supergiant oil field, is set to be completed in 2022. Tengizchevroil, a joint venture between Chevron and other oil producers in which KMG has a 20% stake, leads the project.
KMG is not the only prestige IPO on the market and is set to be followed by Air Astana — likely to be a smaller deal of between £100m and $200m according to investment banks — and Kazakhstan’s national telecommunications operator Kazakhtelecom.
Samruk-Kazyna is said to be looking to replicate the model it used in the Kazatomprom IPO for future listings. Last November saw Samruk-Kazyna sell a stake in Kazatomprom, the state-owned uranium company, in London.
This means future deals could potentially come to the UK capital, where emerging markets investors largely see an economy that is rich in minerals and resources, and is growing and modernising.
Leadership transition
Kazakhstan is one of the most exciting emerging equity market opportunities slated for the next two years, with bankers and investors keen to gain exposure to the country.
The Central Asian republic is in the middle of an economic and political transformation. Nazarbayev — the country’s only post-Soviet leader and affectionately known as Papa — resigned the presidency in March, starting a slow transition of power. The Speaker of the Senate, Kassym-Jomart Tokayev, will serve as interim leader before the next presidential election.
Before his resignation Nazarbayev, who remains the most powerful political force in Kazakhstan, initiated a privatisation programme designed to stimulate the economy to encourage more foreign investment in the country.
At the end of 2017 Kazakhstan was the world’s 14th largest oil producing nation with 1.8bn barrels produced a day — its oil production rose by 10.5% that year.
Kazakhstan’s GDP growth slowed to around 1% in 2015 and 2016. However, recovering oil prices meant that GDP growth was 4% in 2017. GDP growth has hovered around the 4% level through to the end of the first quarter of 2019.