Timing for Kazakhstan's first "People's IPO" still in doubt

By bne IntelliNews September 24, 2012

Clare Nuttall in Astana -

Kazakhstan is edging closer to the first of the planned series of "People's IPOs". But with the date for the IPO of oil transportation company KazTransOil still unclear as of late September, further delays beyond the promised October launch date look likely.

Under the programme, minority stakes of around 5-10% in 10 major state-owned or partially state-owned companies will be issued at a discount to the Kazakh population and pension funds. The programme is intended to stimulate activity on the Kazakhstan Stock Exchange (KASE) - whose development has been held back by a lack of liquidity and low level of retail investment - and foster an investment culture in Kazakhstan.

First announced by the Kazakh government in early 2011, it has taken over 18 months to reach the stage when the first company is nearly ready to list. The first IPOs were initially due to take place in 2011, but the process has been postponed several times - first because of the need to prepare the companies for IPO, and later due to uncertain conditions in the global economy.

Back in March, Kazakh Economic Development and Trade Minister Bakytzhan Sagintayev told a government meeting that both KazTransOil and electricity grid operator Kegoc were ready to issue shares, but that the IPOs were being delayed due to the turmoil in international financial markets at that time.

Since then, Kazakhstan has remained relatively immune to the latest wave of the crisis. However, the worsening global situation is bringing down demand for its main commodity exports, and the country's grain harvest has also been hit by drought. Renaissance Capital said in August that it expected GDP growth of just 5.5% in 2012, due to low agriculture output and falling industrial production.

This being the case, it may be that Astana will postpone the KazTransOil IPO beyond October. An official at KazTransOil told bne in mid-September that no announcement about the timing for the IPO would be made until early or mid-October. Nor has information on the pricing of the IPO - previously expected in August - yet been disclosed. A source close to the process tells bne that the preparations to float KazTransOil are continuing and, while the October date is not set in stone, an IPO is likely by the end of the year at least.

Promoting the candidates

KazTransOil is the main player in Kazakhstan's oil transportation market, shipping 58% of all oil produced in the country, and working with 68 oil producers in Kazakhstan. It runs Kazakhstan's main system of trunk pipelines, managing a total of around 8,000 kilometres of pipelines.

On September 12, Fitch affirmed its long-term foreign currency issuer default rating (IDR) for the company at 'BBB-', with a stable outlook, with Fitch rating based on the firm's "expectations of KTO's continued dominance in oil transportation in Kazakhstan". Speaking during the "Kazakhstan in the International Context" conference in Almaty on September 5, Standard & Poor's analyst Sergei Gorin said that: "So far the People's IPOs are neutral from our point of view, because the main reasons are to provide access to Kazakhstani citizens to ownership of the companies."

Kazakhstan's sovereign wealth fund and state holding company Samruk-Kazyna (the ultimate parent company of most of the companies designated for IPO), the KASE and various government agencies launched an information campaign earlier this year to encourage people to invest in shares in state-owned companies after they are listed on the KASE. Around 100 events are taking place to promote the IPOs and raise awareness about share ownership between June and December. Samruk-Kazyna also launched a People's IPO hotline in April, as well as a website, Twitter feed and a Facebook page.

Around 7.3% of Kazakhstanis are interested in buying shares in state-owned companies through the programme, a survey by Samruk-Kazyna has shown. The survey, reported on the prime minister's website pm.kz, bodes well for the planned IPOs, since the Kazakh government is aiming to sell shares to a minimum of 160,000 people - just 1% of the country's population.

Following the KazTransOil IPO in 2012, IPOs of nine other companies will take place in the following three years, starting in 2013 with the IPOs of Kegoc, national carrier Air Astana, electricity generation company Samruk-Energo, KazTransGas and Kazmortransflot, Samruk-Kazyna has said. National railway operator Kazakhstan Temir Zholy and its cargo transportation subsidiary Kaztemirtrans may be floated by 2014, with oil and gas company National Company KazMunaiGas and state atomic energy company Kazatomprom possibly due to follow in 2015.

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